Global brokerages and economists have warned of an impending US recession after factoring in the impact of the reciprocal tariffs announced by the Donald Trump administration. According to JPMorgan Chase & Co., “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 percent, down from 1.3 percent previously.”
The bank’s chief US economist, Michael Feroli, said in a note to clients that the forecasted contraction in economic activity is expected to depress hiring and, over time, raise the unemployment rate to 5.3 percent. Feroli expects the US Federal Reserve to begin cutting its benchmark interest rate in June and to proceed with rate cuts at each subsequent meeting through January next year.
“If realized, our stagflationary forecast would present a dilemma to Fed policymakers,” Feroli wrote. Citi economists have cut their forecast for growth this year to just 0.1 percent, while UBS economists have reduced theirs to a mere 0.4 percent.
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UBS Chief US Economist Jonathan Pingle said in a note, “We expect US imports from the rest of the world to fall more than 20 percent over our forecast horizon, mostly in the next several quarters, bringing imports as a share of GDP back to pre-1986 levels.”
“The forcefulness of the trade policy action implies substantial macroeconomic adjustment for a $30 trillion economy,” he projected. On Friday, Fed Chair Jerome Powell said, “It feels like we don’t need to be in a hurry” to make any adjustments to rates.
His comments followed the release of the latest monthly employment report from the Bureau of Labor Statistics, which showed robust hiring in March alongside a slight uptick in the unemployment rate, to 4.2 percent.
Meanwhile, Trump’s reciprocal tariffs triggered a massive sell-off across Wall Street, with the Dow Jones plunging over 2,000 points, the S&P 500 witnessing its worst two-day sell-off since March 2020, and the Nasdaq entering bear market territory.
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