Like the gyrations in the stock market, economists have gone back and forth on recession predictions. A year or so ago there was a broad consensus among experts that there would be a recession in 2024 — but it never materialized. By this year, amid strong a strong job market and cooling inflation, such talk had died down.
Then President Donald Trump ignited a trade war, and the recession talk roared back, louder than ever. Ever since Trump first announced earlier this month that he would raise tariffs on almost every country in the world, more and more expert voices have joined the recession chorus.
Morgan Stanley (MS) places the odds of a recession this year at 40%, Goldman Sachs (GS) thinks the likelihood is 45%, and the cautious International Monetary Fund puts the chance of a U.S. recession at 40%, up from 25% last October.
There’s more. JPMorgan Chase (JPM) has said the chance of a recession this year is 65%, renowned Wall Street economist David Rosenberg thinks the odds are as high as 85%, and Torsten Slok, chief economist at Apollo Global Management (APO), calculates the chances of what he calls a “voluntary trade reset recession” at an almost certain 90%. Ray Dalio, the billionaire hedge fund manager of Bridgewater Associates, said recently that he’s worried about “something worse than a recession” because of the trade war.
A recession is generally defined as two consecutive quarters of declining GDP, and there are no shortages of such predictions. The Institute of International Finance, which represents some 400 banks, hedge funds, and other financial firms, published a note last week predicting that the U.S. economy is likely to shrink by 0.8% in the third quarter, and 0.3% in the last three months of 2025.
In its monthly survey of some 80 economists, Bloomberg said that in April the median respondent now sees a 45% chance of a downturn in the next 12 months, up from 30% in March.
Of course, economics is an inexact science, and one can find comfort in the old saw that “economists have predicted nine of the last five recessions.” If concerns about a trade war are driving recession fears, would the outlook turn positive if Trump cuts deals and lowers tariffs, as he has claimed he will?
Possibly, but there are numerous signs that the economy is already weakening.
Some closely watched economic indicators are due out in the next few days — the first quarter GDP estimate, April unemployment numbers, and S&P’s Global Purchasing Managers’ Index among them. Expect economists to rapidly weigh in on whether or not a recession is more, or less, likely this year depending on how those critical data points perform,.
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