What's happened
Analysts are raising recession probabilities following President Trump's upcoming tariffs, set to take effect on April 9. Goldman Sachs and JP Morgan have increased their recession forecasts, citing significant economic risks from the tariffs, which could raise effective rates by up to 20 percentage points. The global economic outlook is now uncertain.
What's behind the headline?
Economic Impact
- Increased Tariff Rates: The tariffs are expected to raise the effective tax rate on US imports significantly, with estimates suggesting an increase of 22 percentage points, equating to a 24% average tax rate.
- Recession Predictions: Goldman Sachs has raised its recession probability from 35% to 45%, while JP Morgan has escalated its forecast to 60%. This reflects a consensus that the tariffs will depress capital spending and consumer confidence.
- Global Repercussions: The tariffs are viewed as a 'functional tax increase' on US households and businesses, likely leading to higher prices on everyday goods and services.
Market Reactions
- Investor Sentiment: Following the announcement, US stock markets have experienced volatility, with fears that the tariffs will stifle growth and reignite inflation.
- International Relations: The tariffs could provoke retaliatory measures from affected countries, further complicating trade relations and economic stability.
Future Outlook
- Policy Changes: While the current trajectory suggests a downturn, analysts note that policy adjustments could mitigate some negative impacts. However, sustained tariffs could lead to a prolonged economic downturn.
What the papers say
According to Business Insider UK, Goldman Sachs analysts noted that the tariffs would likely lead to a recession, stating, "the scale of the 'Liberation Day' tariffs exceeded expectations." JP Morgan's Bruce Kasman echoed these sentiments, emphasizing that disruptive US policies pose significant risks to the global outlook, raising recession probabilities to 60%. The NY Post highlighted that these tariffs represent a functional tax increase on US consumers, with potential long-term economic consequences. The consensus among economists is that if these tariffs remain in place, they will likely push both the US and global economies into recession.
How we got here
President Trump announced substantial tariffs on imports, ranging from 10% to 50%, on April 2, 2025. This move, termed 'Liberation Day,' has prompted economists to reassess the economic landscape, with many warning of potential recessionary impacts both domestically and globally.
Go deeper
- What are the specific tariffs being implemented?
- How might these tariffs affect everyday consumers?
- What are the potential global repercussions of these tariffs?
Common question
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How Are Trump's Tariffs Impacting the Global Economy?
President Trump's recent tariffs have sparked significant discussions about their effects on the global economy. As these tariffs take effect, many are left wondering how they will influence inflation rates, economic growth, and international trade relationships. Below, we explore some of the most pressing questions surrounding this topic.
More on these topics
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Donald John Trump is an American politician, media personality, and businessman who served as the 45th president of the United States from 2017 to 2021.
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The United States of America, commonly known as the United States or America, is a country mostly located in central North America, between Canada and Mexico.
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JPMorgan Chase & Co. is an American multinational investment bank and financial services holding company headquartered in New York City.
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The Goldman Sachs Group, Inc., is an American multinational investment bank and financial services company headquartered in New York City.
