MW JPMorgan now says there's a 60% chance of a recession after tariff hikes

By Steve Goldstein

Jamie Dimon finally has his hurricane. JPMorgan's economics team has just raised their recession probability to 60% following the aggressive tariff stance announced by U.S. President Donald Trump.

In a note entitled, "there will be blood," chief economist Bruce Kasman and his team said this year's 22-percentage tariff increase amounts to the largest tax hike since 1968.

"The effect of this tax hike is likely to be magnified - through retaliation, a slide in U.S. business sentiment, and supply chain disruptions. The shock is likely to be only modestly dampened by the flexibility tariff hikes afford for further fiscal policy easing," they say.

They aren't make immediate changes to forecasts as the initial implementation - and possible negotation - take hold. "However, we view the full implementation of announced policies as a substantial macroeconomic shock not currently incorporated in our forecasts. We thus emphasize that these policies, if sustained, would likely push the U.S. and possibly global economy into recession this year," they say.

While any downturn from the current U.S. and global economic expansion is likely to be mild, "recessions are inherently unpredictable. Another important concern is that sustained restrictive trade policies and reduced immigration flows may impose lasting supply costs that will lower U.S. growth over the long run," they say.

They said the tariff hike, bigger than the Smoot-Hawley tariff of 1930, could be even more damaging given that the share of imports is larger now, as broader globalization has taken hold.

Using an International Monetary Fund model of a U.S. 20% tariff hike as well as retaliation from China and Europe, the researchers say it will reduce U.S. gross domestic product by about 2 percentage points and global GDP by 1 point.

The S&P 500 SPX on Thursday saw its biggest one-day slide since June 11, 2020. Futures (ES00) on Friday were lower ahead of jobs data and comments from Fed Chair Jerome Powell.

-Steve Goldstein

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April 04, 2025 05:54 ET (09:54 GMT)

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