New U.S. tariffs spark economic fears, trigger market crash, and force major banks to slash growth forecasts.
What’s Happening?
JPMorgan Chase & Co. has issued a strong warning: the U.S. economy is on the brink of a recession in 2025, following the announcement of massive tariffs by President Donald Trump.
According to Michael Feroli, JPMorgan’s chief U.S. economist, these aggressive trade measures will severely impact economic growth. In a note to investors, he revealed that the country’s GDP is now expected to shrink by -0.3%, a steep fall from their earlier forecast of +1.3%.
“We now expect real GDP to contract under the weight of the tariffs,” Feroli stated.
Wall Street in Panic Mode: $5.4 Trillion Wiped Out
After Trump revealed the new tariff policy, the S&P 500 index plunged to its lowest level in nearly a year. Within just two trading days, the U.S. stock market lost an astonishing $5.4 trillion in market value.
Key Tariff Details:
- 10% flat import tariff on all goods starting April 5
- Higher, customized tariffs for countries with the largest trade deficits with the U.S. starting April 9
- India hit hardest, facing a 26% tariff on all exports to the U.S.
Other Banks Follow Suit
JPMorgan isn’t alone in its grim outlook. Other top financial institutions are also slashing their projections:
- Barclays Plc predicts a full-year contraction, confirming recession signs
- Citi revised its 2025 growth forecast to just 0.1%
- UBS adjusted its projection to 0.4%, warning that U.S. imports could fall over 20%
Federal Reserve: A Turning Point?
Feroli believes that the Federal Reserve will start cutting interest rates as early as June to cushion the blow. The central bank is expected to lower rates at every meeting until January, bringing the benchmark rate down from 4.25%–4.5% to 2.75%–3%.
However, this will come despite rising inflation, with core prices forecasted to hit 4.4% by year-end, up from 2.8%.
Fed Chair Powell: A Warning Call
Speaking at a recent business journalism conference, Fed Chair Jerome Powell expressed deep concern over the new tariffs. He warned that the economic damage could be far worse than anticipated, making the Fed’s job of controlling inflation even more difficult.
“The forcefulness of this trade policy implies a substantial macroeconomic adjustment for a $30 trillion economy,” said Powell.
What It Means for You
These developments signal serious challenges ahead for:
- Investors (market instability, lower returns)
- Consumers (price hikes, reduced imports)
- Exporters and small businesses (higher costs, reduced demand)
- Global trade partners, especially India
Bottom Line
The U.S. is staring down the barrel of a 2025 recession. With major banks adjusting their outlook, markets in turmoil, and inflation on the rise, the impact of Trump’s tariff war could reshape not only America’s economy but global trade itself.
