JPMorgan Increases Global Recession Risk to 60% Amid Sweeping US Tariff Hike

JPMorgan has raised the likelihood of a global recession in 2025 to 60%, citing escalating economic risks following a major US tariff increase announced on Liberation Day.

The investment bank warns that this move represents the most significant tax hike on American households and businesses since 1968. If fully enforced, it could trigger a severe economic downturn both in the United States and globally.

Under the newly introduced tariff regime, a blanket 10% duty will be imposed on all imports into the US. Higher tariffs—potentially exceeding 20%—will specifically target countries with substantial trade surpluses with the US, particularly China and the European Union (EU).

According to JPMorgan’s estimates, the policy will raise the average effective tariff rate by 22 percentage points. This translates into an additional tax burden of around $700 billion—equivalent to approximately 2.4% of US GDP.

“A tariff increase of this scale would rival the largest tax hike since the Second World War,” noted JPMorgan’s chief economists, led by Bruce Kasman.

The bank cautions that the direct economic impact of these tariffs will likely be exacerbated by secondary consequences such as retaliatory measures from trade partners, declining business confidence, and disruptions to global supply chains.

These ripple effects could reduce household purchasing power and weaken consumer spending, amplifying the economic slowdown.

“Although current economic indicators suggest resilience in both the US and global markets, the unpredictable nature of recessions means a deeper downturn cannot be ruled out,” the economists explained.

They also warned that long-term restrictive trade policies and lower immigration rates could inflict lasting damage on the US economy by constraining supply-side growth.

JPMorgan’s revised economic outlook now assigns a 60% probability to a global recession—up from 40% in its previous projection. Meanwhile, the chance of a so-called “Goldilocks” scenario—marked by stable growth and normalised inflation—has been cut to just 10%.

While the bank has not immediately adjusted its official forecasts, it is closely monitoring the rollout and potential revisions of the new trade measures. Without significant policy reversals, JPMorgan believes the current trajectory could push the US—and potentially the global economy—into recession before year-end.

The firm also highlighted that any fiscal or monetary policy response is likely to provide only limited relief. Emerging markets, particularly in Asia, are expected to bear the brunt of the downturn due to their heavy reliance on exports and exposure to the new US tariffs.

(Sources: investing.com, reuters.com)