Major bank now predicting Trump policies will drive US into a recession by end of 2025

04 April

A screen shows trading indexes at the New York Stock Exchange (NYSE) in New York City, U.S., April 3, 2025. REUTERS/Brendan McDermid

One leading American bank has now adjusted its economic forecast for the remainder of 2025 to be far more bearish following President Donald Trump's new tariffs.

On Friday, Bloomberg reported that JPMorgan Chase chief economist Michael Feroli told the bank's clients that real GDP growth is now likely to contract by the fourth quarter of the year "under the weight of the tariffs," and that this would likely impact Americans' jobs and personal finances. He estimated that rather than the previous forecast of 1.3% GDP growth this year, the U.S. economy would now shrink by a third of a point.

"The forecasted contraction in economic activity is expected to depress hiring and over time to lift the unemployment rate to 5.3%," he wrote.

JPMorgan isn't the only bank forecasting a recession. According to Bloomberg, Barclays Plc also projected this week that the U.S. economy could soon take a dive, with GDP contracting "consistent with a recession." And while Citigroup stopped short of predicting a U.S. recession, it did adjust total GDP growth expectations this year to just 0.1%.

Most economists generally agree a recession has begun once there are two consecutive quarters of negative GDP growth. This week, the Federal Reserve Bank of Atlanta forecasted that GDP may contract for the first quarter of 2025 by anywhere from 0.8% points to 2.8% Should this trend continue this summer, the U.S. economy may officially be in recession territory by the fall.

Financial markets have been reeling since Trump's tariff announcement on Wednesday in which he imposed double-digit tariff duties on all countries, with higher import fees that will particularly impact certain products like cars manufactured overseas and foreign-made apparel. The Dow Jones Industrial Average closed roughly 2,200 points lower than it did yesterday, for a nearly 5% drop in 24 hours. This week has been the worst for stocks since the Covid-19 pandemic hit in 2020.

Trump has called on Federal Reserve Chair Jerome Powell to lower interest rates, though Powell responded to Friday's jobs report by saying "it feels like we don’t need to be in a hurry" to adjust interest rates. The Bureau of Labor Statistics found that while more than 220,000 jobs were added to the economy last month, the unemployment rate rose slightly to 4.2%, with public sector job cuts as a result of the Trump administration's slashing of the federal workforce serving as a major contributor to the jobless rate.

Click here to read Bloomberg's report in full (subscription required).

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