Recession Risk Rises Sharply as Wall Street Braces for Tariff Fallout
3min read Goldman Sachs ups recession odds to 45%; Wedbush warns of ‘economic Armageddon’ for tech sector
Dimon: Inflation, trade policy and fiscal chaos could cause structurally higher rates
The economic storm clouds over Wall Street are gathering fast—and some of the sharpest minds in finance are sounding the alarm. In new research published this week, goldman sachs raised its 12-month U.S. recession probability to 45%, citing a cascade of tightening financial conditions, mounting trade tensions, and surging policy uncertainty. The firm slashed its 2025 GDP forecast to just 0.5% Q4/Q4, down from 1.0% previously, and warned that additional tariffs set to go into effect this week could tip the scales decisively toward a recession.
“Our forecast still rests on the assumption that the effective U.S. tariff rate will rise by 15 percentage points,” wrote chief economist Jan Hatzius and colleagues. “If most of the April 9 tariffs do take effect...we expect to change our forecast to a recession”
The goldman note titled Countdown to Recession outlines three key shocks compounding the economic picture: unexpectedly aggressive tariff announcements, foreign consumer boycotts and retaliation, and a spike in economic policy uncertainty to levels exceeding those seen during the 2018–2019 trade war. All told, the impact is expected to depress capital investment, consumer demand, and business confidence.
Meanwhile, in a separate industry-focused report, Wedbush Securities warned that the tech sector is on the brink of a “Category 5 storm.” Analysts led by Dan Ives described the current environment as the worst in their 25 years of covering the industry.
“This economic Armageddon Trump tariff policy is really going to be implemented this week,” the note reads, adding that the sudden disruption to global supply chains could “set the U.S. tech sector back a decade.” The team expects tech revenue estimates to fall 5–10% for 2025, with chipmakers and hardware firms facing the brunt of the damage. Growth-oriented software names and cybersecurity players may fare better, but even the strongest firms are expected to offer little or no guidance given the scale of uncertainty
Dimon Flags Structural Threats from Inflation and Trade Policy
Against that backdrop, jpmorgan chase CEO Jamie Dimon’s annual letter to shareholders only deepened the unease. Dimon warned that the combination of sticky inflation, unsustainable government spending, and rising trade barriers could lead to structurally higher interest rates and a material risk of recession.
“The new trade barriers will likely increase inflation and are causing many to consider a greater probability of a recession,” Dimon wrote, directly critiquing the White House’s latest tariff push. He emphasized that such policies not only disrupt global supply chains and raise costs for consumers, but also limit the Federal Reserve’s ability to counteract economic slowdowns through monetary easing.
Dimon’s assessment aligns with Goldman’s projection of three “insurance” rate cuts starting in June, but he cautioned that markets might be underestimating the staying power of inflation. “Stickier inflation and ultimately higher rates than markets currently expect remain a real possibility,” he wrote.
He also pointed to the fragility of the U.S. growth story, arguing that much of the recent economic strength has been built on the back of massive deficit spending and past stimulus. As those effects wear off, future fiscal obligations—from infrastructure to defense—could keep inflation elevated even in a slower growth environment.
Investors Face a New Era of Uncertainty
Dimon was particularly blunt about asset valuations, stating that while markets have seen some repricing, “prices remain relatively high.” Without calling equities outright overvalued, he suggested that many risk assets still fail to reflect the breadth of macro uncertainty. His message to investors: adopt a more defensive posture and prepare for a more volatile future.
In the fixed income space, Dimon flagged long-term risks stemming from elevated deficits and uncertain inflation dynamics. While he didn’t offer detailed commentary on alternative assets, his tone pointed to an emphasis on capital preservation.
Goldman’s economists reached a similar conclusion. “Policy uncertainty is likely to be much larger than in the first trade war,” the firm stated, noting that many more U.S. companies are exposed to this new wave of tariffs and potential policy shifts.
Taken together, the signals from Dimon, Goldman Sachs, and Wedbush point to a profound pivot in the market environment. What had been a cautiously optimistic growth narrative now increasingly resembles a countdown to contraction.
As markets prepare for the April 9 tariff deadline and major banks begin reporting earnings later this week, all eyes are on corporate guidance and policy signals. Whether the current moment marks a mere bump in the road—or the start of something more systemic—remains to be seen. But the consensus from Wall Street’s top thinkers is unmistakable: turbulence lies ahead.
Ask Aime: "Undeterred by Goldman's recession forecast, what tech stocks are investors still bullish on?"
