J.P. Morgan Warns Tariff Chaos Could Slash Global GDP 1% as U.S. Stocks Struggle

Globe and Mail

08-05-2025

J.P. Morgan's (JPM) latest analysis on U.S. tariffs raises more questions than answers, especially when it comes to the global economic outlook. While President Trump's trade moves have been causing plenty of disruptions, J.P. Morgan analysts believe the impact is far from straightforward. The firm's commentary signals that tariffs might push global GDP down by 1%, but that could be just the tip of the iceberg.
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Tariff Woes Could Lower Global GDP by 1%
J.P. Morgan has warned that a global GDP reduction of up to 1% is possible if the trade war escalates, particularly with the U.S. slapping 10% tariffs on goods from all trading partners and ramping up those on China to 104%. Joseph Lupton, a global economist at J.P. Morgan, highlighted how the knock-on effects, including weakened business sentiment, could make this damage even worse. These tariffs could lead to higher costs for U.S. consumers, which, in turn, dampens spending and risks dragging both U.S. and global growth.
S&P 500 Likely to Stay in a Tight Range
Despite the trade war turbulence, J.P. Morgan's analysts aren't expecting an immediate crash in the stock market. Instead, they're forecasting a 'range-bound' S&P 500. Fabio Bassi, head of Cross-Asset Strategy at J.P. Morgan, said, 'We expect the S&P 500 to be constrained to the lower end of our range.' This sentiment echoes the concern that mixed tariff news, combined with President Trump's unpredictable moves, will keep markets in a holding pattern. Investors are bracing for a scenario where trade deals don't materialize quickly enough to boost sentiment.
As indicated by the TipRanks graphic below, the S&P 500 has decreased by nearly 7% over the past three months. This drop reflects a turbulent market period (SPX). Investors are digesting the ongoing uncertainty surrounding tariffs and their global impact.
Will a Recession Follow? J.P. Morgan Thinks It's Possible
Adding to the uncertainty, J.P. Morgan's analysts see a 40% chance of a global recession by the end of 2025. Bruce Kasman, J.P. Morgan's Chief Global Economist, noted, 'The uncertainty surrounding tariffs is weighing on business confidence and could accelerate the push toward a downturn.' This isn't just about numbers on paper. The actual business sentiment has been dipping, and that means companies may hold back on investments and hiring. If that happens, it could further stifle growth and deepen the recession risk.
Mixed Signals Make Tariffs More Complex Than Expected
In a world where the trade policy landscape shifts almost daily, J.P. Morgan's analysis shows how tariffs are more than just taxes—they're changing the way the global economy works. In fact, GDP forecasts are being slashed and business confidence is at a low, this ongoing tariff drama is likely to have ripple effects for years. The situation remains pretty fluid, so its important to note that J.P. Morgan's cautious outlook paints a picture of a turbulent but range-bound future. The real question is, will things ever calm down, or are we stuck in this cycle?