Synopsis
Global brokerages and economists warn of an impending US recession due to the impact of reciprocal tariffs by the Trump administration, projecting GDP contraction and increased unemployment rates.Key Takeaways
- US GDP projected to contract by -0.3%
- Unemployment rate may rise to 5.3%
- Fed expected to cut rates starting June
- Import levels may drop over 20%
- Wall Street faces significant sell-off
New Delhi, April 5 (NationPress) Global brokerage firms and economists are raising alarms about a looming US recession due to the effects of the reciprocal tariffs implemented by the Trump administration.
As per JPMorgan Chase & Co, “We now foresee real GDP contracting due to the tariffs, and for the entire year (4Q/4Q), we now anticipate real GDP growth of -0.3 percent, a drop from our previous estimate of 1.3 percent,”
The bank’s chief US economist, Michael Feroli, noted in a client memo that this anticipated contraction in economic activity is likely to hinder hiring and gradually increase the unemployment rate to 5.3 percent.
Feroli predicts that the US Federal Reserve will start cutting its benchmark interest rate in June and continue reducing rates at every following meeting until January of the next year.
“If realized, our stagflation forecast would pose a challenge for Fed policymakers,” Feroli added.
Citi economists have revised their growth outlook for this year down to just 0.1 percent, while UBS economists have lowered theirs to a meager 0.4 percent.
Jonathan Pingle, the Chief US Economist at UBS, mentioned in a note that “We expect US imports from around the globe to decline by over 20 percent throughout our forecast period, mostly in the upcoming quarters, bringing imports as a percentage of GDP back to pre-1986 levels.”
“The intensity of the trade policy measures indicates significant macroeconomic adjustments for a $30 trillion economy,” he projected.
On Friday, Fed Chair Jerome Powell stated, “It feels like we don’t need to rush” regarding any rate adjustments.
His remarks came after the latest monthly employment report from the Bureau of Labor Statistics, which revealed strong hiring in March, alongside a slight rise in the unemployment rate to 4.2 percent.
Meanwhile, Trump's reciprocal tariffs triggered a substantial sell-off on Wall Street, with the Dow Jones plummeting over 2,000 points, the S&P 500 experiencing its most significant two-day sell-off since March 2020, and the Nasdaq entering bear market territory.
