JPMorgan Raises U.S. Recession Risk to 40% Amid Escalating Tariff Policies
In a note released to clients this week, JPMorgan Chase & Co. revised its estimate of the probability of a U.S. recession in the next 12 months to 40%, up from previous forecasts. The key driver behind this adjustment, according to the bank's chief U.S. economist Michael Feroli, is the proposed tariff package introduced by U.S. President Donald Trump, which, if enacted, could substantially alter the current macroeconomic trajectory.
The proposed measures include a universal 10% tariff on all U.S. imports and an additional 60% tariff on goods imported from China. Analysts at JPMorgan describe these policies as effectively imposing a tax on U.S. consumers, with the potential to significantly increase inflation and erode real household incomes. The anticipated rise in import prices would likely suppress domestic consumption—a critical pillar of U.S. GDP growth.
Feroli cautioned that "while the implementation timeline and details remain uncertain, the scope and scale of these tariffs would represent a material tightening of financial conditions and may reduce corporate margins, hiring, and capital investment."
Financial markets have responded with visible concern. Following public discussion of the tariff proposals, the S&P 500 Index dropped 4.8% in a single session, eliminating over $2 trillion in market value. Key sectors including consumer discretionary, technology, and logistics were among the hardest hit—highlighting investor sensitivity to policy risks and global trade tensions.
JPMorgan’s analysis also pointed to the rising disconnect between credit and equity markets. While credit spreads remain relatively stable, the equity markets are beginning to price in the potential for a policy-induced economic contraction. This divergence signals growing uncertainty and highlights the need for scenario-based planning among institutional and private investors.
At Latitude3, we view these developments as a critical inflection point. The global investment landscape is entering a phase of heightened volatility, driven not only by cyclical dynamics but also by structural shifts in trade and geopolitical risk. For investors with exposure to U.S. markets—or those seeking alternatives—this is a time for disciplined strategy, diversified positioning, and careful monitoring of economic indicators and political developments.
As always, our team remains available to support clients in interpreting macro signals and adjusting portfolios accordingly.
