Consumer Outlook Shifts Towards a Recession

After Liberation Day the stock market plummeted due to high tariffs by President Donald Trump. According to some experts. about $6 trillion was lost by this stock decline. While it’s impossible to know exactly what the future holds, many are bracing for a recession.

Consumer Outlook Shifts Towards Recession

The Liberation Day tariffs resulted in the S&P 500 dropping 4.8%. Just two days after the tariffs were announced, China announced a retaliatory 34% tariff on all US goods. due to that, the S&P 500 dropped another 6%. This massive dip in the stock market has experts pessimistic about the economic future of the United States. Bruce Kasman, the head of economic research at JPMorgan gave his insight. In a note “There Will Be Blood” Kasman stated that he expects the probability of a recession to be 60%, up from a recent 40% expectation. JPMorgan expects the US GDP to decrease 0.3% in Q4 of 2025 compared to the same quarter of the previous year. This is down from the 1.3% expected growth the bank expected before tariffs. Additionally, the bank expects unemployment to reach 5.3% next year.

Kasman said “The size and disruptive impact of U.S. trade policies, if sustained, would be sufficient to tip a still healthy U.S. and global expansion into recession” and that “The tariff shock will likely be magnified by its effect on sentiment and through potential disruptions to global supply chains.” However, some experts believe Kasman is jumping the gun. Noruma Chief Economist David Seif said that he needs to see more data. Once that data comes in, that would give Seif and his team a better prediction for a potential recession. While a recession may not necessarily take place, Seif believes it may feel like a recession for some.

What the Experts are saying

Seif said “Real consumption could be extremely anemic, and it could feel worse for people than the GDP numbers indicate.” Trump’s goal with these tariffs is to bring international jobs into the United States. Experts debate whether or not tariffs would actually accomplish this goal. However, experts do agree that the tariffs will decrease the spending power of the average American household. The average tariff rate in 2024 was a meager 2.5%. After Liberation Day, the average tariff rate is about 22.5%, according to the Yale Budget Lab.

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Generally when economic growth drags, the Fed will lower interest rates. However, with complications due to inflation, the Fed is feeling pressure to potentially avoid cutting rates until there are clear signs of a weakening economy. Of this, Blerina Uruçi, chief US econoimst at T.Rowe Price said “The Fed has its hands tied, and I don’t think monetary policy support is going to be likely.” Uruçi went on to say that “I do think we have to rely on the U.S. consumer being resilient and absorbing this shock if we want to see a recession being avoided this year.”

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