Traders are conducting transactions at the New York Stock Exchange (NYSE) in New York City, as depicted in a photograph by Spencer Platt of Getty Images.
JPMorgan analysts have advised their clients that President Trump's tariff proposal is expected to have significant negative impacts on the economy. They cautioned that there is now a higher likelihood, increasing from 40% to 60%, of the global economy entering a recession due to the imposition of tariffs. The analysts also highlighted the potential for the restrictive trade policy to cause damage to the supply side, leading to reduced long-term growth in the United States.
JPMorgan's chief global economist expressed a pessimistic view regarding President Trump's aggressive tariff strategy, stating that there will be severe consequences. In a research note released to clients, JPMorgan economists, led by Bruce Kasman, expressed concerns over the escalating risk of a global recession following the announcement of the "Liberation Day" tariffs.
President Trump unveiled a comprehensive plan imposing 10% tariffs on goods imported into the United States from any country, with even higher tariffs for 60 trading partners having a persistent trade deficit with the US. These broad-reaching tariffs affect countries like China, Japan, the European Union, and territories near Antarctica, which are home to penguins. They are in addition to existing tariffs imposed on the US's primary trade partners, Canada and Mexico.
JPMorgan's research note points out that the disruptive US trade policies have been identified as the most significant threat to the global economic outlook throughout the year. The recent tariff announcement has reinforced concerns as the US trade policy has taken a less business-friendly turn than anticipated.
Describing tariffs as essentially a tax increase on imported goods purchased by US households and businesses, JPMorgan's economists highlighted that the additional costs caused by Trump's tariff plan are expected to lead to higher prices for a range of products, from everyday items to big-ticket purchases like cars and appliances.
The research conducted by JPMorgan's analysts indicates that the recent tariff announcement, coupled with earlier tariff hikes, has resulted in a substantial increase in the US average tax rate. This increase is equivalent to about 2.4% of the country's total GDP, which is comparable to the largest tax hike since WWII. The repercussions of this tax hike could be further amplified through retaliatory actions, declining business sentiment in the US, and disruptions to the supply chain.
The note emphasizes that if these policies persist, they are likely to push both the US and potentially the global economy into a recession this year. This risk of recession, as per an updated probability scenario assessment by JPMorgan, has been raised to 60%.