JP Morgan analysts have raised concerns about the heightened risk of a global recession following President Donald Trump's recent tariff announcement. The analysts warned their clients about the potentially severe economic impact of Trump's tariff plan, indicating that the risk of a global economic downturn has surged from 40% to 60%. They also highlighted the potential supply-side damage that could hamper long-term growth in the United States.
Drastic Economic Effects of Trump's Tariff Plan
The chief global economist at JP Morgan, Bruce Kasman, along with other company economists, expressed a grim outlook on President Trump's aggressive tariff policy. In a research note published for clients, they specifically mentioned, "There will be blood." This statement underscores the serious implications of the tariff measures on the global economy.
Impact of "Liberation Day" Tariffs
Trump's announcement of sweeping 10% tariffs on imported goods, along with higher tariffs for 60 trading partners with trade deficits, has sent shockwaves through the global economy. The tariffs, dubbed "Liberation Day" tariffs, affect countries like China, Japan, the European Union, and even territories inhabited by penguins near Antarctica. These tariffs add to the existing trade tensions with key partners like Canada and Mexico.
Concerns About Recession and Tax Increase
JP Morgan's economists view tariffs as a form of tax increase on imported goods, impacting both households and businesses in the US. The recent tariff escalation is projected to raise the average US tax rate significantly, potentially reaching 24% of the total GDP. This substantial tax hike, if sustained, could push the US and global economy into a recession, with the likelihood of a recession this year now pegged at 60%.
Potential Consequences and Silver Linings
While the risk of a recession looms large, JP Morgan's economists suggest that it is not inevitable. They point out that policy actions could change, and the current economic expansions in the US and globally are on a solid footing. However, if Trump's tariff policies persist, the analysts warn that the macroeconomic shock could be substantial and challenging to overcome.
Despite the uncertainties, JP Morgan's economists are closely monitoring the situation and remain cautious about the potential long-term effects of the tariff measures. The global economy faces a critical juncture, and the decisions made in the coming weeks could have far-reaching implications for businesses and consumers worldwide.
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By: ktangalakislippert@businessinsider.com (Katherine Tangalakis-Lippert)
Title: JP Morgan Analysts Warn of Increased Recession Risk Due to Trump’s Tariff Announcement
Sourced From: www.businessinsider.com/jpmorgan-analysts-recession-risk-trump-tariffs-2025-4
Published Date: Fri, 04 Apr 2025 01:42:44 +0000
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