A fresh wave of economic anxiety has hit global markets after the Trump administration introduced a sweeping set of new tariffs earlier this week, targeting dozens of countries. The decision has sparked fears of a broad-based slowdown, with major brokerages adjusting their recession risk models in response. J.P.Morgan now sees a 60% chance of both a U.S. and global recession by the end of the year, up from 40% previously.
This sharp revision comes amid a volatile geopolitical and economic backdrop, with China swiftly retaliating by imposing its own set of tariffs on U.S. goods. The tit-for-tat nature of the escalating trade war has already begun to destabilize global financial markets and has prompted analysts to sound the alarm on the long-term impact on global business sentiment, supply chains, and economic growth.
J.P.Morgan, in a research note, pointed to “disruptive U.S. policies” as the most significant risk to the global economy throughout the year. The bank emphasized that the latest trade actions are likely to depress U.S. business confidence and lead to widespread supply chain disruptions. Other brokerages share similar views. Goldman Sachs has increased its probability of a U.S. recession from 20% to 35%, citing weakening economic fundamentals.
HSBC believes the recession narrative will continue to gain momentum. Their models suggest that equity markets are already pricing in a 40% chance of recession. Barclays, BofA Global Research, Deutsche Bank, RBC Capital Markets, and UBS have also voiced concerns, warning that the continuation of Trump’s tariff policies could push the U.S. economy into contraction.
UBS and Barclays, in particular, have lowered their growth forecasts, with estimates for U.S. GDP now hovering between 0.1% and 1%. The sharp declines in Wall Street’s key indices further reflect market unease. Since the January tariff announcement, the S&P 500 has dropped over 8%, marking a difficult quarter for investors. UBS has even downgraded its U.S. equity rating from “attractive” to “neutral,” and Capital Economics now holds the most bearish year-end S&P 500 target at 5,500.
Amid this gloom, some economists are predicting monetary policy relief. J.P.Morgan expects that the negative economic shock could be softened by upcoming interest rate cuts. Goldman Sachs now anticipates three rate cuts by the U.S. Federal Reserve this year, up from two earlier. Nomura and RBC project up to three rate cuts as well, while Citigroup maintains a forecast of 125 basis points worth of cuts starting in May.
UBS foresees a total reduction of 75 to 100 basis points over the rest of 2025, indicating a potentially aggressive monetary response to the unfolding tariff-induced slowdown.
In a slight easing of tensions, the U.S. recently revised its tariff on Indian imports from 27% to 26%. While minor, such moves are being closely watched for any signs of policy moderation.
With economic risks mounting and policy responses still uncertain, markets are expected to remain volatile in the weeks ahead as the global economy navigates yet another round of trade turbulence.
