JPMorgan now sees a US recession this year

In a major shift on Wall Street, JPMorgan has officially become the first big bank to forecast a U.S. recession as a direct result of President Trump’s sweeping new tariffs. According to the bank’s chief U.S. economist Michael Feroli, the economy will contract for two consecutive quarters in the back half of 2025, signaling a formal recession.

“We now expect real GDP to contract under the weight of the tariffs,” Feroli wrote in a note Friday night.

The Numbers

Q3 2025 GDP forecast: -1%
Q4 2025 GDP forecast: -0.5%
2025 full-year GDP: -0.3%
Unemployment forecast: 5.3% (currently 4.2%)
Core PCE inflation forecast (end of 2025): 4.4% (up from 2.8% in Feb)

JPMorgan’s outlook paints a stagflationary picture—rising inflation paired with slowing growth—a double threat that could force the Fed into a policy bind.

Stagflation Risks

The Trump administration’s reciprocal tariff policy, which includes:

A baseline 10% duty on nearly all imports
Targeted 30–54% tariffs on top U.S. trade partners

…has already triggered inflation alarms across the board.

“The pinch from higher prices that we expect in coming months may hit harder than the post-pandemic spike,” Feroli warned.

What Will the Fed Do?

Despite market hopes for rate cuts, JPMorgan is cautious. Feroli sees a 25-basis point rate cut in June, followed by consistent cuts through early 2026, bringing the benchmark rate down to 3%. But he warns the Fed may hesitate:

“Our stagflationary forecast would present a dilemma to Fed policymakers.”

Fed Chair Jerome Powell said Friday it’s still “too soon” to adjust policy and that the Fed is watching for price-wage spirals and signs of persistent inflation. (Powell Warns Trump Tariffs Risk Sparking Higher Inflation)

Outlook

Wall Street had hoped Trump’s policies would remain business-friendly. But the scale and speed of his tariff rollout have blindsided investors and economists alike. JPMorgan’s official recession call may be the first on Wall Street—but it’s unlikely to be the last.