In Matter of Days, Outlook Shifts From Solid Growth to Recession Risk

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The stock market went off a cliff last week after President Trump announced the highest tariffs in more than a century, vaporizing more than $6 trillion of wealth in two days.

Whether the real economy will follow is impossible to know. But the risks are tilting in that direction.

The available evidence suggests U.S. economic fundamentals remained strong through March. Job growth accelerated, with nonfarm payrolls rising 228,000, unemployment low at 4.2%, wages rising at a healthy clip and layoffs rare.

But the world changed Wednesday, which Trump dubbed Liberation Day. He announced massive tariffs on almost every country—effectively the largest U.S. tax increase since 1968, according to JPMorgan. On Thursday, U.S. markets suffered their steepest declines since 2020, with the S&P 500 falling 4.8%. On Friday, China retaliated with 34% additional tariffs on all goods imported from the U.S., and the S&P 500 plunged an additional 6%.

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In a note titled “There Will Be Blood,” JPMorgan’s head of economic research, Bruce Kasman, raised the probability of a global recession to 60% from 40%. The bank expects U.S. gross domestic product to contract 0.3% in the fourth quarter of 2025 from a year earlier; it previously expected 1.3% growth. Unemployment will reach 5.3% next year, JPMorgan says.

“The size and disruptive impact of U.S. trade policies, if sustained, would be sufficient to tip a still healthy U.S. and global expansion into recession,” Kasman said. “The tariff shock will likely be magnified by its effect on sentiment and through potential disruptions to global supply chains.”

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The U.S. economy has been the envy of the world in recent years. Growth has averaged nearly 3% since 2022, outpacing America’s global peers and silencing doubters who predicted aggressive interest-rate increases by the Federal Reserve would cause a recession.

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If the hit to inflation proves temporary and inflation looks set to resume its decline toward the Fed’s 2% target, policymakers could bring the economy back from the precipice by cutting interest rates. But if consumers and businesses expect higher inflation to continue, the Fed would likely avoid cutting until clear signs of weakness emerge, at which point it could be too late to stave off a recession.

“The Fed has its hands tied, and I don’t think monetary policy support is going to be likely,” said Blerina Uruçi, chief U.S. economist at T. Rowe Price. “I do think we have to rely on the U.S. consumer being resilient and absorbing this shock if we want to see a recession being avoided this year.”

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