The risk of a US recession in 2025 has increased to 40%, up from 30% at the beginning of the year, according to JP Morgan’s chief global economist.
Speaking in Singapore, Bruce Kasman highlighted rising concerns over economic stability and governance issues that could impact investor confidence in the US.
He said:
“Where we stand now is with a heightened concern about the US economy.”
Tariffs and Business Confidence
Market jitters have intensified, with US stocks experiencing their steepest selloff in months.
Investors fear that President Donald Trump’s trade policies, particularly import duties, could slow economic growth.
- A Reuters poll found 95% of economists in the US, Canada, and Mexico believe recession risks have increased due to Trump’s tariffs.
- Goldman Sachs and Morgan Stanley have lowered their US GDP growth forecasts for 2025 to 1.7% and 1.5%, respectively.
- JP Morgan’s current projection remains at 2% GDP growth for the year.
Kasman warned that the likelihood of a recession could rise to 50% or higher if Trump follows through on his proposed reciprocal tariffs in April.
He said:
“If we continue down this road of disruptive, business-unfriendly policies, I think the risks on that recession front would go up.”
Impact on US Investment Appeal
Beyond immediate economic concerns, Kasman noted that changes in governance could damage long-term investor trust in US markets.
- The US has historically been seen as a stable investment destination, offering reliability in rule of law, transparent information flow, and consistent regulatory frameworks.
- Recent policy shifts, including government cutbacks, shifts in foreign policy, and the disbanding of advisory committees, could erode that trust.
- Kasman warned that if confidence in US governance weakens, the country’s financial standing could face long-term consequences.
He said:
“The US seems to have established itself as a place where people can be comfortable about rule of law … the integrity of information flow, and that the government isn’t going to be, in unexpected ways, getting involved in the rules of the game.”
A Threat to the Dollar’s Privilege?
Kasman also warned that uncertainty in U.S. policy could undermine the dollar’s dominant global position.
- The US benefits from an “exorbitant privilege,” meaning it can finance deficits at lower costs and attract capital more easily.
- If governance concerns shake investor confidence, this advantage could erode, potentially leading to structural changes in global markets.
Kasman said:
“The risk that that stuff starts to come under pressure and becomes a structural issue in the markets is not something I would, by any means, underplay.”
What’s Next for the US Economy?
As economic risks mount, businesses and investors will closely monitor upcoming policy decisions. The impact of tariffs, governance changes, and market confidence could shape the trajectory of the U.S. economy in the months ahead.
The key question remains: Will policy shifts push the US toward a recession, or will economic resilience prevail?
