America’s largest bank now thinks a US recession is more likely than not in 2025. There’s a 40% chance, JPMorgan reckons, of a global downturn.
This week’s developments, the bank’s Bruce Kasman said, in his latest, represent a “decisive” turn towards a “less business-friendly” policy mix, and might’ve disproven the notion that the Trump administration harbors an “underlying commitment to support the life of the economic expansion.”
While he floated the idea that Donald Trump may not be trying to undermine the economy, Kasman nevertheless said “the direct impact of what looks like a cumulative 20ppt rise in US tariff rates this year would be the largest tax increase on US households and business since the Revenue Act of 1968, which preceded the 1969-70 recession.”
The figure on the left, above, gives you some context. The figure on the right is just Kasman’s updated decision tree. As you can see, subjective recession odds in the bank’s house call are now 60%.
It’s important, I think, to emphasize that the tax hike Kasman mentions (i.e., the impact of the tariffs) will be borne primarily by the middle-class and down, and the tariff revenue raised will be cited by the GOP as a “pay-for” in legislation to extend the Trump tax cuts, the benefits of which accrue disproportionately, and by design, to the rich.
As Kimberly Clausing, a professor of tax law and policy at UCLA’s law school, put it last month, in a piece for the Times, “A better way to think about tariffs is as a key tool to… shift the tax burden away from the well-off and toward the poor and middle-class.”
Obviously, JPMorgan didn’t go there, or anywhere near there, but Kasman was clear enough on the tariffs. The title of the section in his note discussing the implications for US consumers of the levies read: “A large tax hike by any other name.”
Below, find a short excerpt from Kasman which underscores the gravity of what it is Americans (and the world) are staring at in the Trump administration’s tariff actions this week. I present the following brief color with no additional editorializing so as to avoid diluting Kasman’s message which, I think you’ll agree, is poignant enough on its own. To wit, from JPMorgan:
At a basic level, a tariff is a tax increase on US household and business purchases of imported goods. This week’s announcement comes on the heels of earlier tariff increases to raise the US average tax rate by roughly 22ppt to an estimated 24%. Starting from a base of $3.3 trillion of goods imports, this can be viewed as a US tax hike of roughly $700 billion or 2.4% of GDP. A hike of this size would be on par with the largest tax hike since WWII. In terms of tariffs, the latest actions lift the average tariff rate to higher than even those seen during the Smoot-Hawley Tariff of 1930 that many economists argue played a key role in exacerbating the Great Depression. Moreover, a strong case can be made that the latest tariffs are more damaging given that the share of imports and broader globalization are considerably larger now than in the 1930s. The US import share of GDP is currently 11.2%, more than three times higher than in 1930. Combined, the import tax bill at the new tariff rate is five times larger than in 1930.
World wide recession is a foregone conclusion unless US business leaders corral the clown in chief in a dark room and “talk” some sense into that dark hole. The knock on effects of world wide tit for tat tariffs is horrifying to contemplate.
Look at those oil prices drop though! All part of the plan (insert smart guy meme here)…
How much more pain is required for more Trump voters to regret their decision or are they content knowing that someone somewhere else is getting it worse than they are? I’d be lying if I said I’m not feeling a bit of schadenfreude, but then I remember stupidity actually kills people and I feel bad that our species exists.
How much more pain before they regret their decision? They will never regret it. At this point I’m convinced nothing will ever change their minds about Trump. The MAGA faithful have been presented with more than enough information already. They will go down with the ship crying about how the iceberg should have moved out of the way.
Until we have a full-blown recession with a huge spike in unemployment, Trump supporters won’t get it. They need to see themselves, friends and family suffer. And about that time, Fox News will begin hosting GOP members calling for an end to tariffs. And the rift will begin in the GOP.
IMO – this is the first domino in the downfall of MAGA and the global surge in right wing authoritarian populism. But lots of pain is coming first.
Saw charts – “MAGA” approval of Trump is stable/high, “other 2024 Trump voters” approval on jobs, economy, inflation, etc has fallen >20 percentage points in last 2 months. Latter greatly outnumbers former. A “YouGov” poll so grain of salt.
Riots by mid summer. China invades Taiwan early September. MAGA…
Don’t fret, Pete “Beer Goggles” Hegseth has already drawn-up war plans to defend Taiwan. I know, I read about them in The Atlantic.
Don’t look now but here comes the Powell/Trump showdown. How long before Elon illegally fires him to force rate cuts?
This whole FUBAR seems a lot like Trump releasing the big beautiful water from northern California that evaporated and drained long before it got anywhere near the fires in the south. But in this case, Trump is releasing 3 trillion dollars in market cap that will not extinguish anything but itself.
In the end, my prediction is that trade balances will decline only because overall trade shrinks, which by USTR’s “math” could mean that the gerrymandered tariff burden on US exports actually INCREASES (if the denominator in the “formula” declines faster than the numerator, not that that means anything anyway). It’s already pretty evident that the Trump’s magic cure is worse than the imagined disease. But I also predict that Trump’s tariff scheme will not produce anything close to the windfall he needs to justify extending the cuts and he won’t get those either. So just like the California water, this will have been all for naught.
And finally, I predict that the blame for this will be anyone but the man in the make-up smeared mirror.
“Drill baby drill” at $62?
And this comment right here explains how Trump got elected. The aggrieved business owner who thinks the poors need to pick themselves up by the bootstraps and stop suckling on the government teat. Never mind the “moral hazards” and “free lunches” that have propped up the wealthy for the past 4+ decades.
If your workers qualify for foodstamps and Medicaid, who is really the beneficiary of the government largesse? Is it the workers that labor in poverty or the wealthy that take advantage of the underpaid workers? End times for those born on third base and think they hit a triple approaches as government largesse fades and hunger once again fuels the mob. Betting you will never know what hit you.
Hmmm. The gated communities and ghetto approach. Sounds fun.
I told my son who is conservative that if Trump got elected he would cause a depression, I stand with that prediction. He is deporting the people that pick our fresh food, if the farmers can find people to work it will be at a much higher price.
Through his tariffs he will raise the cost of everything.
So, Powell will be behind the curve once again because he should be talking about when he is going to raise rates not lower them.
To maximize discord he is also firing the people who know how to give out social services when they will be needed. I see million people marches in the not to distant future, when people’s benefits get cut off, due to incompetence.