JP Morgan Predicts Recession in US as Trump’s Tariffs Take Toll

J.P. Morgan has warned that the U.S economy is likely to slip into a recession this year, attributing it primarily to the impact of new tariffs imposed by President Donald Trump.

In an investor note released on Friday, the firm’s chief U.S. economist, Michael Feroli, projected that the country’s Gross Domestic Product (GDP) would shrink “under the weight of the tariffs.” He also forecasted that the economic downturn would push the U.S. unemployment rate up to 5.3%.

The bleak assessment comes in the wake of President Trump’s April 2 announcement of sweeping reciprocal tariffs on multiple nations. The move is part of his administration’s effort to address trade imbalances with major U.S. trading partners. According to the tariff plan, a 10% duty will be levied on all imports starting April 5, while countries with the highest trade deficits with the U.S. will face steeper, individualized tariffs from April 9. Among the nations affected, India is subject to a 26% tariff on all its exports to the U.S.

Federal Reserve Chair Jerome Powell also voiced apprehension over the possible economic repercussions of these tariffs. Speaking at a business journalism conference on Friday, Powell stated that the tariff hikes would have a more severe impact than previously expected. He warned that the new trade barriers would not only slow economic growth but also fuel inflation, complicating the Federal Reserve’s ongoing efforts to stabilize the economy.

“While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected. The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” Powell said.

Economists fear that the combination of rising costs for businesses, disrupted supply chains, and declining consumer confidence could accelerate an economic downturn, making the Federal Reserve’s task of controlling inflation even more challenging.

India, one of the countries most affected by the new tariffs, faces a 26% duty on all exports to the U.S. While this has sparked concerns among Indian businesses, global brokerage firm Jefferies has offered a more measured perspective.

Jefferies noted that major Indian export sectors—such as information technology (IT) services, pharmaceuticals, and automobiles—are not directly impacted by the tariff hike. Compared to duties imposed on other nations, the firm described the 26% tariff as “reasonable.”

However, Jefferies also warned that the broader economic slowdown in the U.S. could indirectly hurt Indian exports. A weaker American economy could reduce demand for services like IT outsourcing, which is a significant revenue generator for India.

“The 26% tariff on India is reasonable from a relative perspective. However, a slowing U.S. economy is a negative for Indian exporters, especially IT services companies,” the firm stated.

The tariff hike and recession fears have sent ripples across global financial markets. Investors are closely monitoring how these trade policies will affect international commerce, supply chains, and business investments.