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President Donald Trump’s sweeping tariffs on U.S. imports have heightened economic uncertainty, with several key indicators pointing toward a potential recession in 2025. The administration’s 10% across-the-board tariffs—along with targeted import duties as high as 50% on major trading partners like China, India, and the European Union—have raised alarms among economists and market analysts. Many warn that these measures could dampen consumer spending, hurt manufacturers, and slow overall economic growth.
When combined with rising inflation, aggressive interest rate policies, mounting consumer debt, and increasing political uncertainty, the likelihood of a recession before the end of the year grows significantly.
Wall Street’s Warning: Risks on the Rise
Goldman Sachs has raised the probability of a U.S. recession to 45% in the next 12 months, up from a previous estimate of 35%. This revision follows tightening financial conditions and increased policy uncertainty, which Goldman predicts will depress capital spending more than previously anticipated. According to a Reuters report, Goldman’s concerns echo those of other investment banks that have adjusted their forecasts in response to Trump’s trade policies.
J.P. Morgan has placed the likelihood of both a U.S. and global recession at 60%, reflecting a growing consensus among financial institutions. Just last month, Goldman had already increased its recession probability from 20% to 35%, citing weakening economic fundamentals compared to prior years.
Market reactions have been swift. Major stock indexes have tumbled as President Trump continues to stand firm on his tariff policies. Asian share markets and U.S. stock futures also plummeted on Monday, as investors grew increasingly concerned about a potential global trade war. This fear has led to speculation that the Federal Reserve might implement an interest rate cut as early as May to counteract economic headwinds.
What Would Happen If the U.S. Enters a Recession?
A recession in 2025 could lead to widespread economic disruptions, though the severity would depend on its duration and depth.
Job Losses Across Vulnerable Sectors
Unemployment would likely rise significantly, with historically vulnerable industries—such as construction, manufacturing, retail, and hospitality—experiencing the earliest and most severe job losses. The Congressional Budget Office estimates that a moderate recession could increase the unemployment rate from the current 4.2% to around 6.5–7.5%, translating to 3.5–5 million lost jobs.
Stock Market and Corporate Profit Declines
Corporate profits, particularly in cyclical industries with high fixed costs or discretionary consumer exposure, would take a substantial hit. Historically, S&P 500 earnings have declined between 15% and 25% during recessions. Smaller businesses, which have fewer financial buffers and limited access to credit, could face even greater losses. A market downturn of this scale could erase between $5 trillion and $8 trillion in household wealth, leading to reduced consumer spending and deepening the economic slump.
Government Finances Under Pressure
A recession would also put significant strain on government finances. As tax revenues decline and demand for safety net programs—such as unemployment insurance, food assistance, and healthcare subsidies—increases, the federal deficit could expand dramatically. Some estimates suggest the deficit could exceed $2 trillion annually during a severe downturn.
However, recent budget cuts and program eliminations under the Trump administration have weakened many of these stabilizers. This means that some social support programs may receive less funding than in previous downturns—or may not be available at all. Such fiscal degradation comes at a time when countercyclical spending is most needed, potentially limiting the government’s ability to respond effectively.
Also Read: Is A Global Recession Looming? Major Brokerages, Investment Banks Weigh In On US Economic Risks
