The Trump administration’s aggressive new tariffs are sparking serious concerns of a looming recession both in the United States and across the global economy, according to dire warnings from major financial institutions and investors.
In a dramatic downgrade, JP Morgan—the United States’ largest investment bank—has slashed its U.S. growth forecast, now predicting a 0.3% contraction in GDP for 2025. This marks a sharp drop from its previous projection of 1.3% growth. The bank’s chief U.S. economist, Michael Feroli, cited the weight of the tariffs as the key reason: “We now expect real GDP to contract under the weight of the tariffs.”
This economic alarm comes in the wake of President Donald Trump’s sweeping 10% baseline tariff on imports from nearly all nations, with some products facing levies as high as 50%. The policy, which the president has championed as part of his “America First” economic strategy, has already wiped more than $5 trillion off U.S. stock markets in just two days, fueling global investor panic.
Global Financial Leaders Ring Alarm Bells
Jerome Powell, Chairman of the U.S. Federal Reserve, called the tariffs “significantly larger than expected” and warned that their economic consequences are likely to be equally severe. Meanwhile, International Monetary Fund (IMF) chief Kristalina Georgieva cautioned that the measures pose a “significant risk to the global outlook” at a time when growth is already sluggish.
The trade war has already prompted China to impose retaliatory tariffs of up to 34% on all U.S. imports, escalating tensions between the world’s two largest economies. With both sides refusing to back down, fears of a prolonged global economic crisis are growing.
Britain Faces Double Threat
Across the Atlantic, the UK may also be heading toward financial turbulence. Analysts warn that Britain’s £2.8 trillion debt and weak economic growth could mirror the conditions that triggered Greece’s debt crisis more than a decade ago.
Neil Robson, head of global equities at Columbia Threadneedle, said, “Britain’s situation resembles the lead-up to the eurozone meltdown. If nominal GDP growth stalls below interest costs, the UK could quickly spiral into a debt crisis.”
Bruno Schneller, managing partner at Erlen Capital Management, added, “Trump’s tariffs risk triggering a global stagflation shock. For the UK, that’s a recipe for a gilt crisis—stalling growth, rising inflation, and spiking borrowing costs.”
Investor Confidence Plummets
A new survey by ADS, the trade association for aerospace, defence, and security industries, reveals that business confidence in the UK has plunged by a third in recent months. Half of the companies surveyed are planning to cut investment this year, reflecting the growing unease in the business community.
Aimie Stone, Chief Economist at ADS, called the results a “warning signal,” adding that Trump’s trade blitz “threatens the stability of global markets.”
More Tax Hikes Looming in the UK
The UK Chancellor, Rachel Reeves, has already made deep cuts to welfare spending to recover £9.9 billion in fiscal headroom. However, economists warn that if the global economy weakens further, additional tax hikes may be needed to avoid breaching fiscal rules. The Office for Budget Responsibility has said a full-blown trade war could erase any remaining margin for economic error.
Despite mounting pressure, President Trump has remained defiant, insisting that his tariff policy is “going very well” and claiming the economy is “healing.”
Recession Fears Take Hold
JP Morgan has now raised its estimate of a global recession to 60%, up from 40%, as financial markets reel from the fallout of Trump’s tariff escalation. Many analysts agree that unless the U.S. administration reverses course, the world could be headed for one of its most disruptive economic downturns in recent history.
“This is something we’re going to remember for a very long time,” warned Robson. “If Trump doesn’t course-correct, the ripple effects will hit every corner of the global economy.”
