Experts have been estimating what the Trump tariffs might mean for the economy if they stay in place.
Many economists and business leaders have publicly and privately said the trade policies would drive up the price of goods in the U.S., raising the rate of inflation and ultimately resulting in a recession. More broadly, a new note from JPMorgan Chase estimates that the hikes would total about 22%, as Reuters reported, which would effectively be the largest U.S. tax increase since 1968.
J.P. Morgan Research raised the chance of a U.S. recession to 40% at the end of March, up from 30% at the start of the year. Last fall, it was about 25%. The firm then lowered its 2025 real GDP growth estimate to 1.6% and expected unemployment to peak at 4.4%, still a low rate historically.
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Just a few days later, a team led by Bruce Kasman, a managing director and chief economist for JPMorgan, released a note titled “There Will Be Blood.”
“The effect of this tax hike is likely to be magnified — through retaliation, a slide in U.S. business sentiment, and supply chain disruptions,” it said, according to MarketWatch. “The shock is likely to be only modestly dampened by the flexibility tariff hikes afford for further fiscal policy easing.”
It further said that the full implementation of the new round of policies announced on April 2 would provide a “substantial macroeconomic shock” that they hadn’t yet incorporated into their forecasts.
“We thus emphasize that these policies, if sustained, would likely push the U.S. and possibly global economy into recession this year,” it wrote. Noting that a downturn would likely be mild but also warning that “recessions are inherently unpredictable.”
The size of the tariff hike is larger than that of the infamous Smoot-Hawley Tariff Act in 1930; JPMorgan cautioned and said it could be more damaging in the U.S. given that imports are much higher now.
In the U.S., areas heavily involved in North American manufacturing supply chains — including the Midwest, Southeast, and Pacific Northwest — would feel the heaviest tariff burden, according to a new analysis from the Federal Reserve Bank of Richmond.
The Richmond Fed looked at the average effective tariff rate (AETR) in 2024, when it was 2.2%. The additional 20% tariffs on Chinese imports and 25% on aluminum and steel, already in effect in March 2025, increase AETR to 7.1%. That brings the costs of goods from China up by about 22 cents on the dollar.
Adding 25% tariffs on imports from Mexico and Canada outside the United States-Mexico-Canada Agreement negotiated during Trump’s first term, brings the AETR to 10.4%. Effective rates for Mexico and Canada would rise to 15.5% and 11.9%, respectively.
Applying the 25% auto tariffs increases AETR to 12.4%. In sectors like transportation equipment, the country-level AETRs are 30% for Mexico and 20% for Canada. Finally, the 25% tariff on all EU imports brings the category to 17%.
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