JPMorgan has become the first major Wall Street institution to formally project that the United States will fall into a recession in the latter half of 2025, citing the economic damage from sweeping tariffs imposed by President Donald Trump.
The bank’s chief US economist, Michael Feroli, warned in a note to clients that the cumulative weight of these tariffs — especially the 10% duties Trump has slapped on imports from most US trading partners — will begin to contract economic growth, pushing the country into what Feroli describes as a “stagflationary” scenario.
In his latest forecast, Feroli projects the US economy will shrink by 1% in the third quarter of 2025, followed by a further 0.5% contraction in the final quarter of the year. For the full year, GDP is expected to fall by 0.3%. The downturn, he said, would push the unemployment rate to 5.3%, up from the 4.2% recorded in March.
“We now expect real GDP to contract under the weight of the tariffs,” Feroli wrote Friday evening. “The pinch from higher prices that we expect in coming months may hit harder than in the post-pandemic inflation spike, as nominal income growth has been moderating recently, as opposed to accelerating in the earlier episode.”
The stark prediction is already being felt across financial markets. The Dow Jones Industrial Average plunged nearly 3,300 points over the week, an 8% decline that dragged the index into correction territory. The S&P 500 lost 9%, while the Nasdaq Composite fell 10%, pushing it officially into bear market territory — down more than 20% from its previous peak.
Feroli said the tariffs will increase consumer prices, depress household spending, and weigh heavily on business investment. While Trump insists the import taxes will help fund his planned extension of the 2017 tax cuts and bring back domestic manufacturing jobs, economists argue they’re already fueling inflation at a time when consumer spending is vulnerable.
“Consumers may be reluctant to dip too far into savings to finance spending growth,” Feroli warned, noting the fragile state of household balance sheets in a high-interest rate environment.
The White House, however, remains unshaken. Trump has continued to champion his economic strategy as a long-term fix to decades of trade imbalances, claiming that the pain Americans are experiencing now will eventually pay off. Speaking Thursday as markets were in freefall, Trump dismissed the economic concerns, saying the country would “boom.” The next day, he hit the golf course, as the Dow suffered its worst one-day drop since March 2020 — falling by 2,200 points.
Trump’s tariff plan is viewed by many Republicans as one of the boldest gambits of his presidency. After feeling constrained by advisers in his first term, Trump has now leaned fully into his long-held protectionist beliefs. The latest round of tariffs spares almost no major trade partner, including Canada, Mexico, the European Union, and China. That has prompted swift retaliation from Beijing and sharp criticism from European capitals, where leaders are preparing their own countermeasures.
Despite the financial turmoil, Trump has shown no signs of reversing course — at least for now. He has framed the tariffs as a patriotic obligation and a path to restoring American greatness.
“We have to endure a little pain to win back our economic independence,” he said in an address earlier this week.
That defiance, however, is beginning to stir unease — even among some of Trump’s supporters and Republican lawmakers.
Rep. French Hill, a Republican from Arkansas, voiced his reservations during a town hall Thursday night, particularly about the broad application of tariffs on neighbors like Canada and Mexico.
“I don’t support across-the-board tariffs as a general matter,” Hill said. “And I will be urging changes there because I don’t think they will end up raising a bunch of revenue that’s been asserted.”
But others remain supportive, even if uneasily so. Frank Amoroso, a 78-year-old retired engineer from Michigan who voted for Trump, told AP the tariffs are a step in the right direction — though he’s worried about short-term pain. “I think he’s doing things too fast,” he said. “But hopefully things will get done in a prudent way, and the economy will survive a little downfall.”
Doug Deason, a Republican donor based in Texas, echoed the sentiment. “It is hard to watch our portfolios deteriorate so much, but we get it. We hope he holds course,” he said, noting that Trump had always warned that economic disruptions would accompany his trade policies.
The broader economic implications are still unfolding, but JPMorgan’s projection has amplified fears that the president’s tariffs — far from being a tool of leverage — are pushing the US into the early stages of stagflation: a toxic mix of stagnant growth and rising prices. Feroli’s team expects the Fed’s preferred inflation measure — the core Personal Consumption Expenditures (PCE) index — to rise to 4.4% by the end of 2025, up from 2.8% in February.
That would complicate the Federal Reserve’s response. While investors had previously priced in four rate cuts by the Fed this year, Feroli now warns that the central bank may be paralyzed by the conflict between rising unemployment and stubborn inflation.
“If realized, our stagflationary forecast would present a dilemma to Fed policymakers,” he said.
Still, he believes the Fed will prioritize the labor market and begin cutting rates as early as June, reducing the benchmark rate by 25 basis points at each meeting until it hits 3% in January 2026.
The political fallout from the economic turmoil is also beginning to reshape the national mood. Democrats, still reeling from their 2024 defeat, are showing renewed momentum. They clinched a key state Supreme Court seat in Wisconsin and have begun organizing what is expected to be the largest round of protests since Trump’s return to office.
“The winds are changing,” said Rahna Epting of MoveOn, one of several advocacy groups planning nationwide demonstrations.
Progressive groups believe Trump’s economic gamble could hasten a political realignment.
“Raising prices across the board for your constituents is not popular,” said Ezra Levin, co-founder of Indivisible. “It’s the kind of thing that can lead to a 1932-style total generational wipeout of a party.”
For now, however, the recession JPMorgan predicts appears increasingly likely — not as a risk on the horizon, but as the logical outcome of policies that Trump has no intention of backing down from.
