Economy

J.P. Morgan Warns: Trump's Tariff Shock Could Lead to U.S. Recession and Stagflation by 2025

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Apr 5, 2025 — 2 min read

An Economic Storm on the Horizon

The U.S. economy finds itself on the brink of a storm as J.P. Morgan issues a foreboding forecast for 2025. Citing the aftermath of sweeping new tariffs imposed by President Trump, J.P. Morgan’s chief U.S. economist, Michael Feroli, warns of a looming recession. According to The Economic Times, this marks the first official recession prediction from a major Wall Street institution.

Tariffs Spark Market Turmoil

The sudden imposition of a 10% base import duty by Trump has unleashed market chaos, leading to an unprecedented plunge in U.S. stocks. The Dow Jones Industrial Average nosedived by 2,231 points, marking its darkest day since March 2020, with a chilling evaporation of $5.4 trillion in market value over just two trading sessions.

Job Market and Consumer Worries

The ripple effects of these tariffs could prove dire for American workers and consumers alike. J.P. Morgan anticipates a rise in unemployment to 5.3%, potentially crimping the robust hiring pace seen earlier this year. As import costs rise, inflationary pressures are set to intensify, creating a pinch that reverberates through the economy.

Stagflation: A Ghastly Prospect

Feroli points to a dreaded stagflation scenario, an unsettling mix of stalled growth and climbing prices, that could haunt the economy. With projections placing core inflation at 4.4% by the year’s end, concerns over a price-wage spiral add a further layer of complexity for Federal Reserve policymakers.

Fed Faces Rate-Cutting Pressure

In this volatile landscape, the Federal Reserve may find itself caught between a rock and a hard place. Feroli forecasts impending rate cuts starting in June, although Federal Reserve Chair Jerome Powell remains cautious. Market speculation points to a barrage of rate cuts in a bid to stave off the recessionary tide.

A Divergent Economic Future

With echoes of broader consensus from institutions like Barclays and Citi, the specter of a structural economic shift looms over the U.S. economy. The aggressive trade measures are expected to slash U.S. imports significantly, reshaping economic dynamics for years to come.

As the world watches, the U.S. stands at a crossroads. Could Trump’s tariff tactics trigger not just a recession but a profound economic retreat? The stakes have never been higher, and the coming years could redefine America’s position on the global economic stage.

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