JPMorgan forecasts US recession due to Trump’s tariffs; GDP growth revised down, unemployment expected to rise.

In Short

JPMorgan Chase & Co. predicts a US recession in 2025 due to Trump-era tariffs, with GDP growth potentially falling to -0.3% and unemployment rising to 5.3%.

Following these announcements, major financial institutions have lowered growth forecasts, while the Federal Reserve may begin cutting interest rates despite inflation concerns.

JPMorgan Chase & Co. has projected that the US economy is likely to enter a recession in 2025 due to the tariffs imposed by the Trump administration.

The bank’s chief US economist, Michael Feroli, indicated that real GDP growth could contract by 0.3%, a significant drop from the previously expected growth of 1.3%. This contraction may also lead to decreased hiring and an increase in the unemployment rate to 5.3%.

Following the announcement of the tariffs, the S&P 500 index experienced a significant decline, resulting in a loss of $5.4 trillion in market value over just two trading sessions.

US imports

Other financial institutions, including Barclays and Citi, have similarly adjusted their projections for US economic growth downward, with Citi estimating growth at only 0.1% for the year. UBS has forecast a more than 20% reduction in US imports in the coming quarters.

Feroli anticipates that the Federal Reserve will begin cutting interest rates starting in June, reducing the current benchmark rate to between 2.75% and 3%. This decision comes despite a projected rise in inflation.

Fed Chair Jerome Powell recently stated that there is no urgency to adjust rates amidst strong hiring figures and a slight rise in unemployment to 4.2%. Investors are expecting significant rate cuts by the end of the year.