First Wall Street warning: JP Morgan says Trump’s tariffs will tip US into recession

JP Morgan just broke ranks, and set off alarms. The Wall Street giant has become the first major U.S. bank to forecast a recession for 2025, directly blaming President Trump’s sweeping new tariffs for tipping the economy into retreat. 

It’s a stark shift in sentiment, marking the moment trade policy turned from political theater into an economic threat.

“We now expect real GDP to contract under the weight of the tariffs, and for the full year (4Q/4Q) we now look for real GDP growth of -0.3 per cent, down from 1.3 per cent previously,” said Michael Feroli, JP Morgan’s chief U.S. economist, in a note to clients, as reported by Bloomberg.

Feroli expects the recession to hit in the second half of 2025, with GDP shrinking by 1% in Q3 and 0.5% in Q4. The trigger: Trump’s latest tariffs — a 10% base duty on all imports, with additional levies on countries like Mexico and Canada.

The Dow Jones Industrial Average plunged 2,231 points on Friday — its worst day since March 2020. The S&P 500 fell 6%, while the Nasdaq dropped 5.8%, officially entering bear market territory. Combined, U.S. equities lost $5.4 trillion in value over two trading sessions.

The global response is already underway. China slapped a 34% reciprocal tariff on U.S. goods, while other nations signaled they may retaliate or revisit trade pacts.

“The forecasted contraction in economic activity is expected to depress hiring and over time to lift the unemployment rate to 5.3 per cent,” Feroli warned. That’s up from 4.2% in March, according to the Bureau of Labor Statistics.

He also flagged a looming squeeze on household finances. “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,” Feroli said. “Moreover, in an environment of heightened uncertainty, consumers may be reluctant to dip too far into savings to finance spending growth.”

Inflation is projected to climb, with the core PCE index forecast to hit 4.4% by year-end — prompting Feroli to describe the outlook as “stagflationary.” He expects the Fed to begin cutting rates in June, with reductions continuing into early 2026.

JP Morgan is no longer alone. Barclays now forecasts a contraction, Citi sees only 0.1% growth, and UBS pegs it at 0.4%. “The forcefulness of the trade policy action implies substantial macroeconomic adjustment for a $30 trillion economy,” said UBS economist Jonathan Pingle.