Forbes Recession Tracker: Goldman, JPMorgan Say Recession Incoming If Trump Doesn't Blink On Tariffs

Forbes

07-04-2025

Economists at the U.S.' largest banks warn the U.S. will likely tip into a recession as President Donald Trump's tariffs go into effect, reflecting the bloodbath on Wall Street over the last five days in response to the economic policies which threaten to bring higher inflation and far weaker economic growth.
P{resident Donald Trump speaks to reporters while in flight Sunday on Air Force One.
Goldman Sachs economists hiked their odds of a recession over the next year to 45% in a downbeat note to clients Sunday, far higher than the 20% probability they held in late March and cautioning that without any capitulation from Trump, their baseline economic forecast is for a recession.
Economists at JPMorgan, the U.S.' largest bank by assets and market capitalization, issued an even starker 60% recession odds in a scathing Friday note, labeling Trump's policies as the 'largest tax increase' since 1968 which will 'fall heavily on the US consumer.'
There's a growing chorus of economists warning about the prospect of Trump sending the U.S. into an avoidable downturn.
The UCLA Anderson School of Management published last month an official 'Recession Watch' for the first time in its 73 years of economic forecasts, as economist Clement Bohr issued a scathing assessment of Trump's economic policies, writing the Recession Watch 'serves as a warning to the current administration: Be careful what you wish for because, if all your wishes come true, you could very well be the author of a deep recession.'
A recession is 'entirely avoidable' if Trump's signature economic policies, including the most severe tariffs in nearly a century and the public sector's dismantling at the hands of Elon Musk's Department of Government Efficiency (DOGE), are 'pared back or phased in more gradually,' according to Bohr.
Moody's Analytics' chief economist Mark Zandi struck a similar chord in a March 19 interview on CNN's 'Early Start with Rahel Solomon,' saying it 'feels like we're being pushed into recession' by Trump.
Stock prices don't completely correlate with economic growth, but equity investors are clearly pricing in significantly increased odds of a down stretch for the U.S. economy. The S&P 500 dove into a 20% bear market earlier Monday, wiping out about $10 trillion in market value, led by stocks considered the most vulnerable to a slowdown, including artificial intelligence darling Nvidia and Elon Musk's Tesla.
Ahead of the 'Liberation Day' announcement last week, Trump braced Americans for a possible recession. In a Fox News interview aired March 9, he would not rule out the possibility of a recession, cautioning Americans for a period of economic 'transition' as his policies take hold and noting he's paying little attention to stock market losses. In subsequent media appearances, Treasury Secretary Scott Bessent similarly declined to dismiss a potential recession and said the U.S. will go through a 'detox period.' Bessent told NBC's 'Meet the Press' in an interview he believes it 'would have been much healthier if someone had put the brakes' on ahead of the Great Recession. 'Be Strong, Courageous, and Patient, and GREATNESS will be the result!,' Trump wrote on his Truth Social platform Monday.
The technical definition of a recession is two consecutive quarters of negative growth in gross domestic product, a comprehensive measure of all goods and services produced in a country. The official quarterly GDP stats haven't turned negative yet, but the Atlanta Federal Reserve's real-time model ignited concerns by calling for -1.8% annual GDP growth in 2025's first quarter, which would be the worst reading since 2020—though the estimate is likely skewed by its methodology, including how it accounts for a surge in gold imports.
Elsewhere in financial markets, a flight to government-issued debt is evidence of a thirst for safer returns in the face of a potential recession, as yields for benchmark 10-year Treasury bonds have dropped by more than 30 basis points over the past two months (lower yields mean bonds got more valuable). But the most common bond market signal of a recession, the inversion of the yield curve, in which longer-term bonds have lower yields than shorter-dated ones, has actually normalized in recent months. The New York Fed's bond-linked recession model calls for just 30% recession odds over the next year, down from the more than 70% odds in late 2023, a period which failed to materialize into a full-blown recession.
Perhaps the most concerning signal over the last is a breakdown in everyday Americans' conviction in the economy, as the Conference Baord's closely watched consumer confidence survey tumbled this month to its lowest level since 2021. That tracks with weaker spending, as February retail sales grew by just 0.2% from January to February, according to a report released March 17 by the Census Bureau, far worse than the 0.6% month-over-month increase projected by economists.
One of the most important hallmarks of the American economy, the labor market has shown some cracks in early 2025 as job creation slowed and layoffs spiked, but remains overwhelmingly strong, as March's 4.2% unemployment rate sits well within the healthy historic norm. A key labor market recession indicator, the Sahm rule, flashes a far lower likelihood of a recession than it did when it peaked last summer, inspiring a short-lived market selloff in August.
Trading in two of the world's most precious commodities certainly point to the prospect of a global recession. Gold prices are up more than 10% this year to a record $3,000 per troy ounce as investors flood into the historic safe haven asset, while prices for international benchmark Brent Crude sank this month to their lowest point since 2021 as traders braced for a potential global weakening in oil demand as economic activity slows.
Bessent and Trump have made clear they are lasered in on lowering interest rates, which are determined by the politically independent Fed. Typically, rates are only drastically cut during periods of economic distress, as lower rates typically stimulate economic growth as households and businesses are more likely to borrow with lower interest costs, though that uptick in loan activity can simultaneously lead to higher inflation as demand rises. The Fed is likely to hold off on further rate cuts 'until tariff policy becomes clearer,' according to David Mericle, Goldman's chief U.S. economist.
Bank of America's monthly survey of global fund managers released this month revealed some 63% of these influential investors expect the global economy to weaken over the next year, making March the second biggest jump in macroeconomic pessimism since the poll's 1994 inception. The survey also revealed fund managers fled to cash this month at the highest rate since March 2020 and moved away from U.S. stocks at their fastest pace on record, signaling an unraveling of faith in stateside equities. The fund managers heavily agree White House policy is the single biggest risk, with 55% of respondents citing a tariff-driven trade war sending the global economy into a recession as the top threat and 13% naming actions from Elon Musk's Department of Government Efficiency sending the U.S. into a recession as the biggest risk. The Bank of America survey was conducted March 7-13 among 205 global fund managers who collectively manage $477 billion in assets.