What is the chance of U.S. recession? J.P. Morgan economist sees ‘heightened concern’

Traders work on the floor of the New York Stock Exchange on March 11, 2025.(Richard Drew / AP Photo)

SINGAPORE — There is about a 40 per cent chance of a U.S. recession this year and a risk of lasting damage to the country’s standing as an investment destination if the administration undermines trust in U.S. governance, according to J.P. Morgan’s chief economist.

“Where we stand now is with a heightened concern about the U.S. economy,” Bruce Kasman, the U.S. investment bank’s chief global economist, told reporters in Singapore on Wednesday.

He said he has not yet revised any forecasts, but put a roughly 40 per cent recession risk into the outlook - up from about a 30 per cent chance he had reckoned on at the start of the year. J.P. Morgan’s current forecast is for two per cent U.S. GDP growth this year.

U.S. stocks have suffered their sharpest selloff in months over recent days as investors have grown nervous that U.S. President Donald Trump will slow the economy with import duties.

Ninety-five percent of economists polled by Reuters last week across Canada, Mexico and the U.S. said recession risks in their economies had increased as a result of Trump’s tariffs.

Economists at Goldman Sachs and Morgan Stanley last week downgraded their U.S. GDP growth forecasts and now see growth at 1.7 per cent and 1.5 per cent this year, respectively.

Kasman said the recession risk would rise, probably to 50 per cent or above, if reciprocal tariffs that Trump has threatened to impose from April were to meaningfully come in to force.

“If we would continue down this road of what would be more disruptive, business-unfriendly policies, I think the risks on that recession front would go up,” Kasman said.

He also said that discomfort around the administration’s style could shake investor faith in U.S. assets if it challenged trust, built over many years, in U.S. markets and institutions.

“The U.S. seems to have established itself as a place where people can be comfortable about rule of law ... comfortable about the integrity of information flow, and they can be comfortable that the government isn’t going to be, in unexpected ways, getting involved in the rules of the game,” he said.

The administration’s cutbacks to government agencies, changes to the U.S. role in the world, and decisions such as a move last week to disband advisory committees assisting with data collection, may undermine that, Kasman said.

“All of those things are part of the uncertainties that have moved into U.S. policy, and that part of the risk in the outlook this year I don’t think has been appreciated,” he said.

“The term which has been in place for a very long time is that we have ‘exorbitant privilege’. That we end up paying a much lower cost for financing our deficits and debt, we have much greater capital flows and attractiveness of the dollar and assets, because of these things,” he 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.”

(Reporting by Tom Westbrook; Editing by Kim Coghill)