The Blubber

The likelihood of a U.S. recession in 2025 has jumped to 60% from 40% following President Donald Trump’s announcement of sweeping new tariffs, according to JPMorgan.

Why It Matters
Even before Trump unveiled the full scope of the reciprocal tariffs, economists had raised alarms that expanding duties on a growing list of countries and products could destabilize U.S. trade, squeeze domestic producers, and further stoke inflation. Taken together, experts warned, these developments could tip the U.S. into a recession this year.

What to Know
“Disruptive U.S. policies have been recognized as the biggest risk to the global outlook all year,” wrote Bruce Kasman, JPMorgan’s chief economist, in a note to clients on Thursday.

“We thus emphasize that these policies, if sustained, would likely push the U.S. and possibly the global economy into recession this year,” Kasman added. “An update of our probability scenario tree makes this point, raising the risk of a recession this year to 60%.”

In his highly anticipated “Liberation Day” speech, Trump announced a 10% baseline tariff on nearly all imported goods, along with sharply higher “reciprocal tariffs” targeting dozens of countries accused of unfair trade practices. China is now facing a 34% tariff, while the EU and Japan are seeing rates of 20% and 24%, respectively.

Although Trump previously vowed to match foreign tariffs one-for-one, he described the new plan as “kind reciprocal” tariffs—where the U.S. responds, but with slightly lower rates than what other countries impose.

JPMorgan’s Michael Feroli called the tariffs “the largest tax increase” since the 1968 Revenue and Expenditure Control Act, which imposed a 10% surtax on personal and corporate income to fight inflation during the Vietnam War.

What People Are Saying
Kasman said the announcement “reinforces our fears as U.S. trade policy has turned decisively less business-friendly than we had anticipated.”

Feroli estimated the new measures could raise nearly $400 billion in revenue—about 1.3% of GDP—and increase prices by 1% to 1.5% over the course of the year, with the brunt of that inflation hitting in the middle quarters.

“The resulting hit to purchasing power could push real disposable income into negative territory in Q2 and Q3, with real consumer spending potentially contracting as well,” Feroli warned. “That alone could bring the economy to the edge of a recession.”

Trump defended the tariffs, saying Wednesday: “My answer is very simple if they complain: If you want your tariff rate to be zero, then 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, 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 cooling, we had record corporate profits and the highest stock prices in history.”

Olu Sonola, head of U.S. economic research at Fitch Ratings, echoed the concern: “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.”