Despite Trump's tariff pause, recession risk remains: JP Morgan

Despite US President Donald Trump’s pause on most tariffs , JPMorgan Chase has kept the possibility of recession this year at 60 per cent.

Hours after tariffs came into effect on Wednesday, Trump paused the rollout of 90 days. The pause gives nations time the chance to reach a deal with the United States to avoid tariffs. Even as stock markets soared at the announcements, JPMorgan did not change its projection.

“Combined with the ongoing policy chaos on trade and domestic fiscal matters, along with the still-large losses in equity markets and hit to confidence, it remains difficult to see the US avoiding recession,” said JP Morgan in a report on Wedmesday, according to CNN.

Previously, Moody's had reaised the risk of recession in the wake of tariffs from 15 per cent to 40 per cent.

JPMorgan said that “all else being equal”, even though undoing “draconian” tariffs is a positive, the situation remains concerning.

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“However, not all else is equal and the net of where we stand remains concerning,” said JPMorgan.

The bank said that even 10 per cent tariffs on all imports are a “large shock” that is equal to 7.5 times the trade war shock in 2018-19 in Trump’s first term.

“More shocking is the increase in China tariffs to an astounding 125 per cent…We believe that the US war on trade is far from over, and today was merely the end of the beginning,” said JPMorgan.

Last week, when Trump announced the most sweeping tariffs in nearly a century , JPMorgan raised the recession odds to 60 per cent.

JP Morgan said these tariffs are the “biggest risk to the global outlook all year”.

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These tariffs are likely going to be through retaliatory tariffs by other countries, a slide in US business sentiment, and supply-chain disruptions, as per JP Morgan.

Last week, Trump imposed 10 per cent tariffs on all imports and slapped higher tariffs on group of countries. He slapped Vietnam with 46 per cent tariffs, China with 34 per cent tariffs (on top of 20 per cent tariffs already in place), Taiwan with 32 per cent tariffs, India and South Korea with 26 per cent tariffs, and Japan with 24 per cent tariffs, and the European Union (EU) with 20 per cent tariffs. He has since increased tariffs on China to 125 per cent.

Previously, Moody’s Chief Economist Mark Zandi had said that there does not appear to be any way to escape a recession.

“We’ll see over the next few days how our trading partners respond to this. If they are more circumspect and cautious, then we can maybe breathe more easily. But if they retaliate in kind or close to it, I really don’t see how we avoid a recession. These are big tariffs — 25 per cent effective tariff rate,” said Zandi in an interview with NewsNation.