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By Shane Croucher and Hugh Cameron
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The chances of a a U.S. recession this year have jumped from 40 percent to 60 percent off the back of President Donald Trump's announcement of widespread tariffs, according to major Wall Street bank JPMorgan.
Why It Matters
Even prior to the unveiling of the reciprocal tariffs, economists had warned that the expanding list of countries and items subject to import taxes could disrupt U.S. trade, strain domestic industries while intensifying America's inflationary struggles. Taken together, experts told Newsweek that this could push the U.S. into a recession in 2025.
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What to Know
"Disruptive U.S. policies have been recognized as the biggest risk to the global outlook all year," JPMorgan's chief economist Bruce Kasman wrote in a research note to clients published on Thursday.
"We thus emphasize that these policies, if sustained, would likely push the US and possibly global economy into recession this year. An update of our probability scenario tree makes this point, raising the risk of a recession this year to 60%," Kasman added.
In his long-awaited "Liberation Day" speech, Trump unveiled a 10 percent baseline tariff on all U.S. imports and reciprocal tariffs on dozens of countries. The "reciprocal tariffs" target nations perceived as pursuing unfair trade practices, with rates as high as 34 percent on China, 20 percent on the European Union, and 24 percent on Japan.
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While Trump had previously vowed to impose like-for-like duties on countries which tariff U.S. imports—"Whatever they charge us, we're charging them," he said— in his speech he stated that the U.S. was not matching the duties directly and instead enacting what he dubbed "kind reciprocal" tariffs.
Michael Feroli , chief economist at JPMorgan, described Trump's new tariffs as "the largest tax increase" since the Revenue and Expenditure Control Act of 1968, which imposed a 10 percent surtax on individual and corporate income taxes in an effort to curb inflation and reduce the budget deficit during the Vietnam War.
What People Are Saying
Bruce Kasman, chief economist and head of global economic research at JPMorgan: "The latest news reinforces our fears as U.S. trade policy has turned decisively less business-friendly than we had anticipated."
Michael Feroli, chief economist at JP Morgan: "On a static basis, today's announcement would raise just under $400 billion in revenue, or about 1.3% of GDP, which would be the largest tax increase since the Revenue Act of 1968. We estimate that today's announced measures could boost ... prices by 1-1.5% this year, and we believe the inflationary effects would mostly be realized in the middle quarters of the year."
"The resulting hit to purchasing power could take real disposable personal income growth in 2Q-3Q into negative territory, and with it the risk that real consumer spending could also contract in those quarters," he added. "This impact alone could take the economy perilously close to slipping into recession."
President Trump said on Wednesday: "My answer is very simple if they complain: If you want your tariff rate to be zero then you build your product right here in America because there is no tariff if you build your plant, your product in America."
Peter Ricchiuti, senior professor of finance at Tulane University's Freeman School of Business, told *Newsweek: "*The tariffs will be matched by most targeted countries. Tariffs have never worked. They're prosperity killers."
"The worst part of all this is that these economic wounds are self inflicted," he added. "Until the inauguration the U.S. was doing very well. Inflation was coming down, we had record corporate earnings and the highest stock prices ever seen."
Olu Sonola, head of U.S. economic research at Fitch Ratings said: "This is a game-changer, not only for the U.S. economy but for the global economy.
"Many countries will likely end up in a recession. You can throw most forecasts out the door if this tariff rate stays on for an extended period of time."
What Happens Next?
World leaders, in response to the latest duties, have vowed to respond with their own retaliatory measures on U.S. imports, with the President of the European Commission Ursula von der Leyen stating that the continent was preparing "countermeasures to protect our interests and out businesses if negotiations fail."
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