Name: Will Trump’s Tariffs Spur Recession? Four Chief Economists Weigh In | WSJ
Uploaded: 2025-04-29T02:46:39.000Z
Duration: 6 min
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This chart measures the amount of uncertainty over America's economic policies.

And as you can see, there's currently a lot.

Relative clauses (Restrictive vs. nonrestrictive)

That's largely because of President Trump's on-again, off-again tariff agenda, which has rattled financial markets and stoked fears of Possible recession A recession A recession A recession is a loss of faith.

There's nothing worse for the economy than inactivity.

And that is what we're the most worried about.

We asked four chief economists from JPMorgan, Moody's, KPMG, and the Economist Intelligence Unit to lay out their forecast for a potential recession, increased inflation, and the Federal Reserve's path forward.

Recession odds are a quick way for economists to kind of communicate their thinking about the state of the world and where it's headed in the near term, particularly when you're around periods like the current one.

The Wall Street Journal surveyed 64 economists in early April, right before Trump paused his Liberation Day reciprocal tariff policies.

The survey found that the probability of a recession had climbed to 45% over the next 12 months, still lower than the 60% expected in the years prior.

In those instances, no recession ever materialized.

KPMG's Diane Swonk put her own odds around 60% for a recession this year.

We could have a much more severe recession than we're currently forecasting.

A recession is marked when there are two quarters of negative gross domestic product.

Technically, recessions are declared by the National Bureau of Economic Research.

It considers an array of economic indicators, like employment, spending, and industrial production.

Trump has pledged his tariff policies will help bring manufacturing back to the U.S., although he has dialed back some of his trade stances amid the market turmoil.

We get along, I get along very well with the presidency, and I hope we can make a deal.

JPMorgan raised its probability of a recession from 40% to 60% in the wake of Trump's early April tariffs.

The increase in policy uncertainty is likely freezing a lot of capital spending plans.

I think it's very hard for companies, particularly globally oriented companies, to plan.

You know, I would never want to say 100% probability, but I think we're close to 80% probability.

The policy strategy seems to be to create uncertainty and chaos.

I would put the odds of a recession starting at some point, you know, in the next year or so at about 60%, very high.

Once the tariffs are actually implemented and are passed through, and they will be, that's when, you know, we're going to see a lot more damage.

As Federal Reserve Chair Jerome Powell sees it, tariffs could lead to at least a temporary, but potentially persistent, rise in prices.

Avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and ultimately on keeping longer-term inflation expectations well anchored.

The Fed's preferred inflation gauge, known as the Core PCE Index, was 2.8% higher year over year in February.

That's a steady retreat from recent peaks in 2022, but still remains above its 2% target.

We look for some of that improvement to be undone here.

And we think by year end, we'll be looking at that same metric, but something closer to 4%.

Our inflation forecast, that peaks a little over 4%, which is not horrific, but is a big difference from where we're at.

If this affects something like seatbelts, right, and you've produced the whole car, but you don't have the seatbelt, that car isn't going onto the lot.

So you're going to see massive shortages.

We could see a month or two where inflation really spikes up.

That reduction of demand will then lessen the inflation impacts.

Now you've got prices rising more quickly, inflation rising, wages rising, and you get into this kind of self-reinforcing so-called wage price spiral.

And that's what the Federal Reserve and other central banks are deathly afraid of, because that's the basis for so-called stagflation scenarios.

It's a term that's broadly defined as sluggish economic growth accompanied by higher prices and unemployment.

It's commonly associated with the 1970s in the U.S., when gas prices rose and the unemployment rate reached 9%.

And that is why stagflation is a problem for the central bank.

It has a dual mandate to keep both inflation and unemployment low.

Unemployment is likely to go up as the economy slows, in all likelihood, and inflation is likely to go up as tariffs find their way.

And some part of those tariffs come to be paid by the public.

If you were to cut and we saw more inflation, you could literally stoke a more pernicious bout of stagflation and you're better heading it off and keeping things a little cooler, even though it's painful.

We've been saying that the Fed is going to be fashionably late.

We think that they are going to risk having slightly softer growth or a slightly softer employment picture because they don't want expectations of prices to become unanchored.

Trump has shown signs of de-escalating some of his tariff policies, including the 145% tariff he imposed on Chinese goods. 145% is very high and it won't be that high.

Best case, the president takes an off-ramp here on the trade war.

The worst case scenario is he follows through on this and then other countries say, oh, this isn't going away, these tariffs are going to remain in place.

In order for us to pull back our recession forecast, we would need not only a pullback in the level of tariffs, but an increase in the certainty of the trajectory and pathway going forward.

Without trust, you can't do transactions.

We'd also want to see some shoring up of what is the U.S. now going to decide their role is in the global economy.