JPMorgan has become the first great institution of Wall Street to officially project that the United States will fall into a recession in the second half of 2025, citing the economic damage of the radical prices imposed by President Donald Trump.
The main American economist of the Bank, Michael Feroli, warned in a note to customers that the cumulative weight of these prices – in particular the 10% tasks that Trump slapped on the imports of most American trade partners – will begin to contract economic growth, pushing the country in what Feroli describes as a scenario of “Stagflationary”.
In its latest forecasts, Feroli provides that the American economy will decrease by 1% in the third quarter of 2025, followed by another contraction of 0.5% in the last quarter of the year. For the whole year, GDP should drop by 0.3%. The slowdown, he said, would bring the unemployment rate to 5.3%, against 4.2% recorded in March.
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“We are now expecting real GDP to contract under the weight of prices,” wrote Feroli on Friday evening. “The pinch of higher prices that we expect in the coming months can reach stronger than in the tip of post-pandemic inflation, because the nominal growth of income has been moderate recently, instead of accelerating in the previous episode.”
Brutal prediction is already felt in the financial markets. The industrial average of Dow Jones plunged almost 3,300 points during the week, an 8% drop which led to the index in the correction territory. The S&P 500 lost 9%, while the composite of the NASDAQ fell by 10%, officially pushing it in the downward market territory – down more than 20%compared to its previous peak.
Feroli said prices will increase consumer prices, will depress household expenses and weigh heavily on commercial investment. While Trump insists that import taxes will help finance its expected extension of tax reductions in 2017 and bring back national manufacturing jobs, economists argue that they already feed inflation at a time when consumption expenditure is vulnerable.
“Consumers can be reluctant to dive too far into economies to finance the growth of spending,” said feroli, noting the fragile state of household assessments in a high interest rate environment.
The White House, however, remains unshakable. Trump has continued to defend his economic strategy as a long -term solution to decades of commercial imbalances, saying that the pain that Americans now experience will eventually be chargeable. Speaking Thursday when the markets were in free fall, Trump rejected economic concerns, saying that the country “explodes”. The next day, he struck the golf course, while the DOW has undergone its worst day since March 2020 – falling from 2,200 points.
Trump’s pricing plan is considered by many Republicans as one of the most daring Gambits of his presidency. After being forced by the advisers during his first mandate, Trump has now focused on his longtime protectionist beliefs. The latest series of savings rates almost no major trading partner, including Canada, Mexico, European Union and China. This caused rapid Beijing reprisals and strong criticism from European capitals, where managers are preparing their own countermeasures.
Despite the financial troubles, Trump has not shown any sign of inversion lessons – at least for the moment. He developed prices as a patriotic obligation and a path to the restoration of American grandeur.
“We have to endure a little pain to win back our economic independence,” he said in an address earlier this week.
This challenge, however, begins to suspend discomfort – even among some of Trump supporters and republican legislators.
The representative French Hill, a republican of Arkansas, expressed his reservations during a town hall Thursday evening, especially on the general application of prices on neighbors such as Canada and Mexico.
“I do not support the prices on top of the plans as a general question,” said Hill. “And I will urge the changes there because I don’t think they will eventually increase a bunch of income that has been affirmed.”
But others remain favorable, even if uncomfortable. Frank Amoroso, a 78 -year -old retirement engineer from Michigan who voted for Trump, told AP that prices were a step in the right direction – although he worries about short -term pain. “I think he is doing things too fast,” he said. “But I hope things will be careful, and the economy will survive the fall a little.”
Doug Deason, a republican donor based in Texas, echoed the feeling. “It is difficult to see our wallets deteriorate so much, but we get it. We hope that it will open captures,” he said, noting that Trump had always warned that economic disturbances would accompany its trade policies.
The wider economic implications always take place, but the projection of JPMorgan has amplified the fears that the prices of the president – far from being a leverage – push the United States to the early stadiums of stagflation: a toxic mixture of stagnant growth and price increase. The FEROLI team is expected to make Fed’s preferred inflation measure – the basic personal consumer expenses (PCE) – reaching 4.4% by the end of 2025, compared to 2.8% in February.
This would complicate the response of the federal reserve. While investors had previously had a price in four rate drops by the Fed this year, Feroli now warns that the central bank could be paralyzed by the conflict between the increase in unemployment and obstinate inflation.
“If it is made, our stagflationary forecasts would have a dilemma to feed political decision-makers,” he said.
However, he thinks that the FED will favor the labor market and start reduction rates from June, reducing the reference rate of 25 base points at each meeting until it reaches 3% in January 2026.
The political benefits of economic turmoil also begin to reshape the national mood. Democrats, still in shock from their defeat in 2024, show renewed momentum. They won a key seat of the Supreme Court of the State in Wisconsin and began to organize what should be the largest series of demonstrations since Trump’s return to his functions.
“The winds are changing,” said Rahna Epting in Moveon, one of the many plea groups planning demonstrations on a national scale.
Progressive groups believe that Trump’s economic bet could accelerate political realignment.
“The price increase at all elections is not popular,” said Ezra Levin, an indivisible co-founder. “This is the kind of thing that can lead to a total generational wiping of a 1932 style of a party.”
For the moment, however, the recession that JPMorgan predicts seems more and more likely – not as a risk on the horizon, but as the logical result of the policies of which Trump does not intend to retreat.
