The U.S. economy is also currently forecasted to slip into recession this year, and JPMorgan Chase & Co. is attributing it as the main cause, The Hill reported.
The company's chief U.S. economist, Michael Feroli, stated in a Friday night investor report that the GDP of the nation would more likely decline due to the burden imposed by the tariffs.
"We now anticipate real GDP to shrink under the burden of the tariffs,"
Feroli said, as reported by Bloomberg.
He further added that GDP growth is anticipated to fall to -0.3% for the full year (4Q/4Q), down from the earlier projection of 1.3%. In conjunction with this contraction, unemployment is projected to rise to 5.3%, The Hill quoted from the same note.
Trump's April 3 plan to impose broad tariffs on U.S. trading partners across the globe, including India, already shook financial markets. In only two trading days, the S&P 500 index fell to an 11-month low, wiping out $5.4 trillion in market value.
Other leading financial institutions followed JPMorgan's negative prediction.
On Thursday, Barclays Plc also forecasted a 2025 economic recession, consistent with expectations of a full-fledged recession.
On Friday, Citi reduced its 2025 U.S. growth projection to 0.1%, and UBS reduced its projection to 0.4%.
"We anticipate US imports from the rest of the world decline more than 20% over our horizon,"
said UBS chief U.S. economist Jonathan Pingle,
".reducing imports as a percentage of GDP to pre-1986 levels.
UBS further noted that the size of the policy reversal in trade would require "substantial macroeconomic adjustment" for the $30 trillion US economy.
Fed to Start Cutting Rates, Feroli Predicts
Feroli also anticipates the Federal Reserve to start to cut interest rates as early as June, continuing through each meeting to January, eventually lowering the benchmark rate from its current 4.25%–4.5% level to 2.75%–3%.
This would come on top of an increase in core inflation, which is projected to hit 4.4% by the end of the year, up from 2.8% today.
Fed Chair Powell Expresses Concern
Federal Reserve Chairman Jerome Powell joined the chorus of concern on Friday, addressing a conference of business journalists. He said that Trump's new tariffs would have more drastic economic consequences than had been previously expected and make it harder for the central bank to tame inflation.
Trump's Tariff Plan
Under Trump's proposal:
A blanket tariff of 10% started on April 5 for imports from every country.
From April 9, countries with the biggest U.S. trade deficits will have even more, customized tariffs imposed on them.
India has been targeted specifically with a 26% tariff slapped on all its exports to the U.S.
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