JP Morgan has dramatically increased its projection for a U.S. and global recession to 60%, highlighting growing alarm in financial circles as escalating trade tensions threaten to derail economic momentum. This jump from a previous 40% estimate comes amid rising concern that President Donald Trump’s aggressive tariff strategy—especially the imposition of new levies on dozens of countries—will severely impact business confidence, consumer sentiment, and global supply chains. China's swift retaliation with its own tariffs on U.S. goods only intensifies fears of a prolonged and economically damaging trade war.
In its research note, JP Morgan said that the trade policy environment in the United States has become “markedly less business-friendly than anticipated,” pointing to retaliatory measures, declines in business optimism, and looming logistical challenges as key drivers of the projected downturn. “The effect of these tariffs is likely to be magnified through retaliation, a slide in U.S. business sentiment, and supply chain disruptions,” the note emphasized.
The concerns are echoed widely across the financial industry. S&P Global increased its “subjective” probability of a U.S. recession to 30–35%, up from 25% just a month earlier. Goldman Sachs, even before the latest tariff developments, had raised its recession forecast to 35%, citing signs that the economic fundamentals of the U.S. were beginning to weaken. The combination of tighter trade conditions, slowing industrial output, and muted consumer spending has set off alarms about the sustainability of current growth.
HSBC analysts agreed that the recession narrative is quickly gaining traction. They pointed out that while some of the risk is already priced into markets, the environment remains fragile. “Our equity market implied recession probability indicator suggests equities are already pricing in about a 40% chance of a recession by the end of the year,” HSBC stated.
Many leading global financial institutions—including Barclays, BofA Global Research, Deutsche Bank, RBC Capital Markets, and UBS Global Wealth Management—have issued similar warnings. Barclays and UBS, in particular, cautioned that the U.S. economy may be on the verge of slipping into contraction, especially if no resolution to the trade standoff is found. Others forecast minimal economic expansion for the rest of the year, with estimates ranging from just 0.1% to 1% GDP growth—a far cry from previous expectations.
Wall Street has already begun to reflect this grim outlook. Following Trump's second-term election win, markets initially rallied on hopes of renewed pro-business momentum. But since the first round of tariffs was announced in January, U.S. equities have taken a sharp downturn. The benchmark S&P 500 has dropped over 8% year-to-date, as investors reassess the risks posed by long-term trade barriers, declining exports, and reduced corporate earnings.
Brokerages have responded by slashing their market outlooks. Barclays, Goldman Sachs, RBC, and Capital Economics have all lowered their year-end targets for the S&P 500. UBS notably downgraded its equities recommendation from “attractive” to “neutral,” reflecting cautious investor sentiment. Capital Economics has set the most bearish target so far, reducing its projection to 5,500, closely followed by RBC’s revised estimate of 5,550.
The pessimism surrounding the economy has also shifted expectations for Federal Reserve policy. Analysts now believe that the tariff-driven economic slowdown could prompt the U.S. central bank to cut interest rates more aggressively to support growth. JP Morgan stated that while the tariff shock will certainly weigh on activity, its impact could be "modestly dampened" by looser monetary policy.
Goldman Sachs now expects three Fed rate cuts by the end of 2025, compared to two before the tariff news. Nomura projects one rate cut, while RBC anticipates three. UBS sees between 75 and 100 basis points worth of cuts over the remainder of the year. Citigroup reaffirmed its projection of a total of 125 basis points in cuts starting in May. JP Morgan, meanwhile, holds its forecast of two 25-basis-point cuts.
Investor expectations appear to support this trend. According to LSEG data, markets are now pricing in around 100 basis points of rate reductions through 2025. A more accommodative Fed could provide a cushion against the worst-case scenario, but analysts caution that monetary policy alone may not be enough to fully counteract the deepening damage from trade disputes.
In short, the economic outlook has grown increasingly uncertain. With trade tensions showing no signs of easing, and financial markets growing more volatile, many analysts warn that the global economy is inching closer to the edge of a recession. The coming months will be critical as the world watches whether diplomatic solutions emerge—or whether tit-for-tat tariffs continue to fuel an economic slide.
