The possibility of a U.S. recession in 2025 is becoming a growing concern among economists, with J.P. Morgan analysts placing the likelihood at 40%. This marks an increase from earlier estimates, highlighting rising economic risks driven by trade policies, investor confidence, and market uncertainty. While the U.S. economy is still projected to grow, analysts warn that external shocks—such as tariffs, policy instability, and weakening global demand—could push the country toward a downturn. Additionally, concerns over governance and the long-term stability of U.S. financial markets are contributing to fears that economic conditions may deteriorate further.
One of the primary factors driving recession risks is the impact of trade policies and tariffs. Over the past few years, global trade tensions have led to uncertainty in financial markets, affecting business investments and consumer sentiment. J.P. Morgan’s chief global economist, Bruce Kasman, noted that if additional reciprocal tariffs were implemented, the probability of a recession could rise to 50% or higher. A recent Reuters poll found that 95% of economists across North America believe that trade policies have increased recession risks. Similarly, both Goldman Sachs and Morgan Stanley have downgraded their U.S. GDP growth forecasts to “1.7% and 1.5%”, respectively, reflecting a more cautious outlook for the economy (Westbrook 2025).
Beyond trade, investor confidence plays a crucial role in determining the economy’s trajectory. Historically, the U.S. has been viewed as a stable and reliable investment destination due to its strong institutions and transparent market systems. However, Kasman warns that shifts in policy and governance could weaken this trust. He pointed out that the U.S. has long been seen as a country where investors can feel secure about the rule of law and market integrity, but recent policy uncertainties could undermine this perception. If investors begin to see U.S. financial markets as unstable or unpredictable, it could lead to capital outflows and decreased foreign investment, putting additional pressure on economic growth.
In addition to trade and investor concerns, broader policy decisions may further contribute to economic uncertainty. Kasman emphasized that actions such as government agency cutbacks, changes in the U.S.’s global role, and decisions like the disbanding of advisory committees involved in economic data collection could add to market instability. “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 explained (Westbrook, 2025). Such policy shifts, if not carefully managed, could weaken economic confidence and further slow growth.
While these risks are significant, J.P. Morgan’s current forecast still projects U.S. GDP growth at 2% for 2025. This suggests that while a recession is possible, it is not yet inevitable. However, analysts caution that if policy uncertainty continues or economic disruptions become more severe, the risks of a downturn will increase. Kasman emphasized that business-unfriendly policies could further weaken economic conditions, stating that continued disruptions would likely push recession risks even higher.
The coming months will be critical in determining the U.S. economy’s path. Key economic indicators, including labor market trends, corporate earnings, and consumer spending, will provide insight into whether the economy can sustain its current growth rate or if a slowdown is imminent. Businesses and investors will be watching closely, adjusting their strategies based on evolving risks.
Ultimately, while a recession in 2025 is not guaranteed, the increasing probability underscores the need for careful economic management. Policymakers will need to balance trade policies, financial stability, and investor confidence to avoid further economic disruptions. As uncertainty lingers, economic observers remain on alert for signs that the U.S. economy is heading toward a downturn.
Sources
Lahart, Justin, and Paul Kiernan. “Recession Risk Rises as Economic Slowdown Signs Emerge.” The Wall Street Journal, 14 Mar. 2025, www.wsj.com/economy/recession-risk-economic-slowdown-signs-0b9d50c2.
Reuters. “What Is the Chance of US Recession? JP Morgan Economist Sees ‘Heightened Concern.’” CTV News, 12 Mar. 2025, www.ctvnews.ca/business/article/what-is-the-chance-of-us-recession-jp-morgan-economist-sees-heightened-concern.
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