JPMorgan Chase & Co. has projected that the U.S. economy will experience a recession this year due to the anticipated effects of tariffs introduced this week by the Trump administration. According to a note issued by the bank’s chief U.S. economist, Michael Feroli, on Friday, it is expected that real GDP will contract, and the growth for the year (4Q/4Q) is now forecasted at -0.3%, a decrease from the previously projected 1.3%.
Feroli indicated that the expected downturn in economic activity is likely to result in reduced hiring, and over time, could elevate the unemployment rate to 5.3%. The announcement of significant tariffs on U.S. trading partners by President Donald Trump on Wednesday led to a decline in the S&P 500 index of U.S. stocks, reaching its lowest point in 11 months. This move erased $5.4 trillion in market value over just two trading sessions.
JPMorgan’s revised forecast accompanies similar adjustments from other banks, which have been reducing their projections for U.S. growth since the tariff announcement. On Thursday, Barclays Plc noted its expectation for GDP to contract in 2025, aligning with a recession outlook. Moreover, Citi economists reduced their growth forecast for the year to a mere 0.1%, and UBS economists lowered theirs to 0.4%.
UBS Chief U.S. Economist Jonathan Pingle, in a note, stated their expectation for U.S. imports to decline by more than 20% over the forecast period, primarily in the upcoming quarters, bringing import levels as a share of GDP back to those seen prior to 1986. The strong trade policy actions are likely to require substantial macroeconomic adjustments for the $30 trillion economy.
Feroli anticipates that the Federal Reserve will commence reducing its benchmark interest rate in June, continuing with rate cuts at each subsequent meeting through January, ultimately lowering the benchmark to a range of 2.75% to 3% from its current 4.25% to 4.5% range. These anticipated cuts are expected despite an increase in a crucial underlying inflation measure to 4.4% by year-end from the current 2.8%.
In a Friday statement, Fed Chair Jerome Powell remarked that there doesn’t seem to be an urgency to adjust rates. His comments came after the release of the latest monthly employment report from the Bureau of Labor Statistics, which indicated strong hiring in March alongside a slight rise in the unemployment rate to 4.2%. Market participants are betting on a full percentage point decline in rates by the end of the year, as per futures data.
