'Buckle up': What bearish forecasters are eyeing as they call for a recession in 2025

Business Insider

04-05-2025

A recession looks likely to some forecasters on Wall Street — and they're eyeing some big disturbances that could result if the economy does plunge into a downturn.
Fears of a potential economic downturn have spiked since Trump unveiled sweeping reciprocal tariffs in early April. Eighty percent of fund managers said they see the trade war triggering a global recession as the biggest tail risk to markets, according to a survey conducted by Bank of America in April. Betting markets have also been pricing in a higher chance that the economy could tip into a downturn this year.
Here's how a recession could unfold, according to bearish prognosticators on Wall Street.
Mark Zandi, Moody's Analytics
Estimated probability of a recession: More than 50% chance of a global recession starting this year.
Reasoning: The economic pressures stemming from Trump's tariffs look more likely than not to push the global economy into a recession, Zandi said in an interview on The David Lin Report on Friday.
"It all revolves around trade policy. If the administration can take an offramp on policy, lower the tariffs, de-escalate the trade war, then I think we have a fighting shot of making our way through without a downturn. But I say that with each passing day with less confidence, because the longer this goes on, the more damage it's going to do, and the harder it is to bring it all back from the brink," Zandi said.
How a downturn could materialize:
If the US doesn't back down on tariffs, a downturn could first start to hit the manufacturing, transportation, distribution, and agricultural sectors, Zandi said.
The slowdown could then spread to the consumer discretionary sector, suggesting that consumers would pull back on spending in areas like entertainment, recreation, and hospital "soon."
If the economy tips into a recession, stocks could lose another 10% from the lows touched in the days after tariffs were announced. That implies the S&P 500 dropping 20%-30% from its peak in mid-February.
If the economy can avoid a downturn, stocks have already likely hit bottom, he said.
"Buckle up. It's going to be a difficult 2025, one way or another," he added.
JPMorgan
Estimated probability of a recession: 60% chance that the global economy tips into a recession.
Reasoning: Trump's tariffs have made US trade policy "decisively less business-friendly" than the bank had originally anticipated, analysts wrote in a note in April. JPMorgan raised its probability of a global recession from 40% to 60% shortly after Trump's tariffs.
The White House is still negotiating trade deals with other countries, but if left unchanged, the US tariff rate would rise to 24%, equivalent to around 2.4% of the US's total GDP.
"We thus emphasize that these policies, if sustained, would likely push the US and possibly global economy into recession this year," the bank said.
How a recession could materialize:
Trump's original tariffs would effectively result in the largest tax hike on consumers since World War II, analysts said. When factoring in retaliatory measures from other countries, that could cause business sentiment in the US to sink, while supply chains will get disrupted, they added.
Michael Feroli, JPMorgan's chief US economist, said a two-quarter recession could begin as soon as the second-half of 2025. In a separate note in April, Feroli's team estimated that GDP could contract by as much as 1% over the third quarter and half a percent in the fourth quarter. The unemployment rate, meanwhile, could rise as high as 5.3%.
On Thursday, first-quarter GDP came in at -0.3%, the first contraction in three years.
Torsten Sløk, Apollo Global Management
Alphabet
Estimated odds of a recession: 90% chance a US recession occurs this year.
Reasoning: Small businesses, a key pillar of the US economy, are expected to take a big hit from tariffs, which could push the economy into a downturn, according to Torsten Sløk, the chief economist at Apollo.
Small businesses, for one, account for most of the employment in the US. They also account for more investment than large-cap firms, according to Apollo's analysis.
The firm estimates that tariffs could shave off as much as four percentage points from US GDP, basing its estimates on the hit to US growth when Trump first imposed tariffs on China in 2018.
"Small businesses that have for decades relied on a stable US system will have to adjust immediately and do not have the working capital to pay tariffs. Expect ships to sit offshore, orders to be canceled, and well-run generational retailers to file for bankruptcy," Sløk said in a recent note.
How a recession could materialize:
A recession could arrive as soon as this summer, Slok said in a note to clients.
In his timeline, Slok said he believed container traffic from China to US ports could come to a halt by the middle of May.
That could cause trucking demand to fall by mid- to late-May. Later, that could lead to " empty shelves" in stores and force companies to lay off workers by the end of the month, he predicted.