Wall Street shaken as top banks project economic fallout from sweeping US tariff policy
NEW YORK, April 4, 2025 — A stark Trump tariffs recession warning has been issued by JPMorgan Chase, which now projects a 60 percent chance of a global economic downturn in 2025. As first reported by Business Insider, the forecast was detailed in a client note titled “There Will Be Blood,” where JPMorgan’s chief global economist Bruce Kasman warned that President Donald Trump’s sweeping US tariff policy could deliver a severe macroeconomic shock to the U.S. and global economy.
“The risk of the global economy falling into a recession has increased from 40% to 60%,” JPMorgan’s Chief Global Economist Bruce Kasman wrote, adding that Trump’s tariff plan is equivalent to “the largest tax hike since WWII.” The US tariff policy, described as the “Liberation Day” tariff announcement, includes a 10 percent flat import tax on all goods entering the U.S., with higher rates targeting 60 countries, including China, Japan, the European Union, and U.S. neighbors Canada and Mexico.
Goldman Sachs, Moody’s Forecast Deepening Slowdown
Goldman Sachs followed suit, raising its recession risk estimate to 35 percent and slashing its GDP forecast for 2025 to 1 percent. The investment bank also projects that unemployment will rise to 4.5 percent, citing deteriorating business sentiment and weaker consumer confidence.
Moody’s Analytics echoed the concerns. Chief Economist Mark Zandi revised his recession outlook to 40 percent, attributing the shift to aggressive tariffs on imported vehicles and parts, as well as reduced government spending. “The intensifying trade war and government spending cuts are behind this,” Zandi posted on X.
Markets Plunge as Sentiment Weakens
The financial fallout was swift. The S&P 500 logged its worst trading day since 2020, while the Nasdaq and Dow Jones Industrial Average also posted significant declines. Global equity markets lost hundreds of billions in value, with investors flocking to traditional safe havens like gold and U.S. Treasury bonds.
The broader economic impact is already being felt across shipping and trade sectors. Recent developments in U.S. shipping tariffs on Chinese-built vessels have raised concerns about additional cost pressures on American importers and logistics networks.
Meanwhile, the University of Michigan’s sentiment index revealed a sharp drop in consumer outlook, with the highest percentage of Americans expecting job losses since the Great Recession.
Trump Stands Firm on US Tariff Policy Despite Backlash
President Trump has doubled down on the strategy, telling reporters aboard Air Force One that “you’d start with all countries, so let’s see what happens.” The White House has claimed the new tariffs could raise as much as $600 billion annually—a figure widely disputed by economists.
Trade adviser Peter Navarro defended the policy as critical to restoring America’s manufacturing base. “We must become a manufacturing powerhouse that dominates every step of the supply chain,” he said.
Economists Amplify Trump Tariffs Recession Warning as Confidence Drops
JPMorgan’s economists noted that the average US tax rate on imports would surge by 22 percentage points under the Trump US tariff policy, pushing the total to an estimated 24 percent—equivalent to 2.4 percent of GDP. The note warned that this could trigger retaliation, erode business sentiment, and fracture global supply chains.
“Disruptive U.S. policies have been recognized as the biggest risk to the global outlook all year,” the note stated. “The latest news reinforces our fears.”
While JPMorgan acknowledged a recession is “not a foregone conclusion,” the economists said if the policies remain in effect, they would likely push the U.S.—and possibly the world—into recession this year.
Inflation Pressures Build as Fed Prepares to Respond
Goldman Sachs has now raised its year-end core inflation projection to 3.5 percent, citing rising costs for goods from coffee to cars. Inflation-adjusted household income is expected to fall, prompting expectations of up to three Federal Reserve interest rate cuts in 2025. Analysts warn, however, that monetary easing alone may not be enough to blunt the macroeconomic shock.
Retaliation Threatens Escalation of Trade War
Trading partners are preparing retaliatory actions. Goldman Sachs estimates a 15 percent average increase in reciprocal tariffs across affected nations. Economists fear a domino effect that could spiral into a prolonged global trade conflict, undercutting recovery and driving inflation higher.
For vulnerable regions like the Caribbean, the consequences could be severe. Analysts warn that U.S. tariffs could cripple Caribbean trade, especially in economies that depend heavily on U.S. imports, shipping routes, and re-exports.
Bankrate’s Senior Economic Analyst Mark Hamrick noted: “Between trade war escalations, economic uncertainty, and rising inflation, the risks to the economy are growing.”
Global Economic Outlook Grows Uncertain
With mounting pressure on consumer wallets, falling investor confidence, and unresolved geopolitical trade tensions, the global economic outlook remains fragile. JPMorgan’s recession warning, echoed by Goldman Sachs and Moody’s, has intensified the focus on the long-term consequences of protectionist policies.
As the U.S. government continues to assert its trade agenda, economists warn the fallout may be far-reaching—and lasting.
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