According to JPMorgan, the US economy is anticipated to slip into a recession in the latter part of 2025 due to the impact of President Trump's tariffs on the economy. Michael Feroli, the chief US economist at the firm, predicts a two-quarter recession in the latter part of 2025 with a projected 1% contraction in GDP in the third quarter and a 0.5% contraction in the fourth quarter. The yearly projection for 2025 indicates a GDP decrease of 0.3%.

Feroli highlighted that the imposition of tariffs is expected to cause a decline in real GDP. This economic activity slowdown is forecasted to push the unemployment rate to 5.3%, whereas recent data indicated unemployment at 4.2% in March. JPMorgan is the first major Wall Street research team to predict a recession due to Trump's tariffs impacting economic growth, although other economists have also acknowledged the increasing risks of a recession.

The reciprocal tariffs set by Trump, which involve general 10% duties and additional levies on specific trade partners, are foreseen to elevate inflation and hinder economic expansion. Feroli's outlook suggests a "stagflationary" scenario where prices rise while growth decelerates. This situation may pose a challenge for the Federal Reserve, given its objectives of maximum employment and price stability. Markets had already priced in four interest rate reductions from the Fed amid growing concerns about the US economy's direction as of Friday.

Feroli anticipates the Fed will reduce interest rates by 25 basis points in June and continue doing so in subsequent meetings until reaching a benchmark rate of 3% by January 2026. The likelihood of the Fed feeling secure enough in the decelerating economic data to execute interest rate cuts post-June meeting remains a risk, even though Fed Chair Powell stressed a cautious approach to adjusting monetary policy in a recent speech.