2025-04-04T09:22:23.000Z

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In a bold move that many are calling unprecedented, the proposed tariffs announced by former President Donald Trump have raised significant alarms about the potential for a recession in the United States and beyond. For the first time since the early 1900s, the tariffs could radically reshape trade dynamics, introducing a blanket 10% import duty on numerous goods, alongside heightened rates for various countries.

As Wall Street analysts sift through the implications of these tariffs, economic forecasts have increasingly darkened. According to a report from Bloomberg, Bruce Kasman, Chief Economist at JPMorgan, has raised the probability of a global recession to a concerning 60% by the year 2025, a significant increase from the previous estimate of 40%. In a note that accompanied his analysis, Kasman elaborated on the ripple effects of this tax hike, indicating that it could lead to retaliation from trading partners, a decline in US business sentiment, and disruptions to supply chains.

Adding to the grim outlook, Goldman Sachs has similarly revised its recession forecast, now estimating a 35% chance of recession in the upcoming year, a sharp rise from the previous 20%. They have also lowered their GDP growth prediction for 2025 to just 1%, with expectations of unemployment climbing to 4.5%. The investment bank attributed this increased recession probability to a noticeable drop in both household and business confidence over the past month.

On the stock market front, the S&P 500 index reacted sharply to the tariff announcements, experiencing its most significant drop since 2020. This decline resulted in an astonishing $2.4 trillion being wiped off the market, a stark indicator of investor sentiment in light of the new trade policies.

The proposed tariffs are set to impact everyday consumers significantly. With prices expected to skyrocket on a wide range of products, including everything from cannabis to footwear and even high-tech devices like Apple’s iPhone, analysts at Rosenblatt Securities predict that consumers could see the price of a premium iPhone model soar to around $2,300 if the company decides to pass the additional costs onto buyers.

Fitch Ratings has also weighed in on the potential ramifications, stating that the elevated tariff levels could severely alter the global economic landscape. They highlighted that these tariffs would likely lead to increased consumer prices and reduced corporate profits within the US. This scenario would put pressure on real wages, thereby squeezing consumer spending. Meanwhile, the combination of lower profits and heightened uncertainty surrounding policies could hinder business investment. The report emphasized that the upward pressure on goods prices could inhibit the Federal Reserve's capacity to lower interest rates further, with Fitch predicting that the adverse effects of the tariffs would overshadow any potential advantages for US companies stemming from increased protection against foreign competition.

The University of Michigan's sentiment survey has revealed a worrying trend, with levels of Americans expecting rising unemployment reaching unprecedented heights since the Great Recession. Goldman Sachs noted that while consumer sentiment has not always been a reliable predictor of economic activity, the current decline in sentiment is particularly concerning given the relatively weak economic fundamentals compared to previous years.

In a striking escalation of concerns, Mark Zandi, the Chief Economist at Moody's Analytics, has raised his recession forecast to 40%, a significant climb from the earlier estimate of 15%. He attributed this increase to the intensifying trade war and potential cuts in government spending. Trump's proposal to impose a hefty 25% tariff on imported vehicles and their components, combined with expected retaliatory measures from trade partners, adds yet another layer of risk to the economic landscape.

Despite widespread warnings from economists and analysts, Trump remains steadfast in his support for the tariffs. During an interview aboard Air Force One, he stated, "You'd start with all countries, so let's see what happens." While the White House claims that annual revenue from tariffs could reach as high as $600 billion, many economists are skeptical of this figure, arguing that such costs will ultimately be borne by businesses and consumers.