JPMorgan Raises Global Recession Probability to 60% Due to U.S. Trade Policies

JPMorgan Chase has raised its forecast for the probability of a global recession this year to 60%, up from 40%, due to disruptive U.S. policies. The firm cited new U.S. trade policies, including tariffs on China and the European Union, as the primary reason for the increased likelihood of a global economic downturn. These policies have sparked a worldwide trade war, which JPMorgan believes will have significant repercussions on the global economy.

The firm noted that the impact of these tariffs could be magnified through retaliation from other countries, a decline in U.S. business sentiment, and disruptions in global supply chains. These factors, when combined, could create a perfect storm that pushes the global economy into a recession. The tax hikes and other policy changes in the U.S. are seen as particularly disruptive, as they could lead to a cascade of negative effects that ripple through the global economy.

JPMorgan did note that it expects the blow from the tariffs to be dampened by the likelihood of interest rate cuts by the Federal Reserve in the future. This suggests that while the firm is concerned about the potential impact of U.S. policies on the global economy, it also believes that there are measures that can be taken to mitigate these risks.

Other large institutions are also sounding the alarm on a potential recession. Goldman Sachs raised its chances of a recession hitting the U.S. economy in the next 12 months to 35%, a 15% jump from its previous prediction. The firm said that it expects inflation – excluding food and energy prices – to hit 3.5% this year, 1.5% higher than the Fed’s 2% goal. An analyst from the Hong Kong and Shanghai Banking Corporation also noted that the equity market implied recession probability indicator suggests equities are already pricing in about 40% chance of a recession by the end of the year.

Last week, President Donald Trump signed an executive order imposing a 10% tariff on all imported goods entering the U.S., while issuing a proclamation detailing “reciprocal tariffs” on dozens of specific countries effective April 9th, with rates totaling up to 54% on China. These policies have added to the uncertainty in the global economy and have raised concerns about the potential impact on businesses and industries around the world.

The increased probability of a recession is a stark warning for policymakers and businesses alike. It suggests that the current economic environment is fraught with uncertainty and that proactive measures may be necessary to mitigate the risks. The disruption in global supply chains, in particular, could have far-reaching consequences, affecting industries and economies around the world. Businesses that rely on international trade and supply chains may need to reassess their strategies and prepare for potential disruptions.