J.P. Morgan is forecasting that the U.S. economy will enter a recession this year as fallout from President Trump’s tariffs has taken hold.
In a Friday evening note to investors, the company’s chief U.S. economist Michael Feroli said the firm predicts that gross domestic product (GDP) will likely contract “under the weight of the tariffs.”
Feroli added that the recession is also forecasted to “push the unemployment rate up to 5.3 [percent].”
The projection comes after Trump’s Wednesday tariff announcement, which slapped a 10 percent base tax on all goods coming into the U.S. in addition to steeper levies previously placed on Mexico and Canada. Economists have warned of higher retail prices, an economic slowdown and negative effects on jobs as a result of the aggresive move.
“The pinch from higher prices that we expect in coming months may hit harder than in the post-pandemic inflation spike, as nominal income growth has been moderating recently, as opposed to accelerating in the earlier episode,” Feroli added.
Friday’s forecast follows a Thursday report from the company that increased the likelihood of a recession in 2025 from 40 percent to 60 percent. Feroli on Friday predicted that the recession would occur in the second half of 2025.
“In our earlier commentary we noted the most readily quantifiable effect of higher tariffs on activity runs through higher inflation, and hence lower real income and lower real consumer spending,” Feroli wrote Friday, noting that financial uncertainty may prompt consumers to reduce spending.
The top economist also warned of retaliatory tariffs on U.S. exports.
China has already hit the U.S. with a 34 percent reciprocal tax on imports starting next week as others seek to follow suit. Some have pledged to take retaliatory action while other nations have expressed a willingness to negotiate.
Since Trump’s Wednesday announcement, the stock market plummeted to its worst position since March 2020.
The Dow Jones Industrial Average closed with a loss of 2,231 points on Friday, plunging 5.5 percent on the day. The S&P 500 index tumbled by 6 percent, and the Nasdaq composite sank 5.8 percent on the day.
Despite job numbers staying stable in March, the bank’s chief economist warned of tariffs’ adverse effects on the job market.
“The forecasted contraction in economic activity is expected to depress hiring and over time to lift the unemployment rate,” he wrote.
Past officials have warned of the potential negative impact of tariffs for months as the Trump administration charged forward. White House officials have downplayed the public’s concern for economic welfare amid poor projections for the U.S. market.
Sophia Vento contributed to this report.
