JP Morgan lowers forecasts for a recession after Trump’s tariffs with China
EJ Antoni, a senior fellow at Unleash Prosperity, has announced the Republican tax bill and Varney & Co. We analyze the state of the US economy.
JPMorgan trimmed forecasts of the US economy’s chances of recession this year after the president Donald Trump A contract has been reached to temporarily lower the tariffs imposed on imports from China.
The president announced Monday that he has reached a deal to lower the “mutual” tariffs he imposed to reduce the overall tariff rate on Chinese products from 145% to 30% in 90 days, while negotiators work to finalise long-term contracts. The Chinese government reduced retaliatory tariffs on US goods for 90 days from 125% to 20%.
“The recent dial-down of some of the tougher tariffs placed in China should reduce the risk of the US economy falling into a recession this year,” wrote US economist Michael Ferroli at JP Morgan. “With the current rate as a pre-limited condition, this year we are forecasting actual GDP growth from 0.2% to 0.6% (4Q/4Q) before the latest tariff news.”
“We believe that the risk of a recession is still being added, but now it’s under 50%,” Ferroli noted. The company’s previous forecast is Risk of a recession This year is 60% of the days after the Trump administration’s “mutual” tariff announcement.
The White House cuts “minimality” and brings Chinese tariffs to 54%
JP Morgan reduced the chances of a recession to less than 50% amid the suspension of tariffs. (Photographer: Getty Images/Mark Felix via Getty Images/Bloomberg)
JPMorgan’s analysis predicted that the Personal Consumption Expense (PCE) Index – Federal Reserve will be recommended Inflation Gauge – It’s 3.5% at the end of this year, lower than the 4% estimate before the tariffs suspend, but higher than the 2.2% forecast from the beginning of the year.
3.5% PCEReading Fed’s inflation target At 2%, the Fed is more likely to delay interest rate cuts unless the labor market starts to deteriorate. The unemployment rate in April was 4.2%, and JPMorgan predicts that the unemployment rate will peak at 4.8% in the second quarter of 2026.
Customs duties are taxes on imports usually paid by importers who pass higher costs to consumers at higher prices. (Photo by Qian Weizhong/VCG via Getty Images)
“We are projecting a modest contraction on employment later this year as labor demand is projected to be even slower than labor supply,” Ferroli wrote. “It’s updated Lab The outlook does not require much immediate action to reduce employment risk. As for the Fed, it is pushing back the timing of resuming interest rate cuts from September to December. ”
He added that the bank has seen three more consecutive interest rate cuts since December. This would reduce the target range for benchmark federal funding rates from 3.25% to 3.5% by the second quarter of 2026.
Trump says Chinese trade opens markets for US business
Chinese President Xi Jinping and Donald Trump suspended higher tariffs for 90 days while negotiations continued. (Xinhua/Ju Peng via Getty Images/Getty Images)
The report noted changes to Chinese products tariffs It cut the average effective tariff rate from about 24% to about 14%, far exceeding the effective tariff rate of 2.3%, which was won in 2024, but a marked decline.
“a Customs duties are taxesAnd compared to previous assumptions, this can be considered a tax cut of almost $300 billion,” writes Felori.
Click here to get your Fox business on the go
“This tax restriction should bring some degree of easing in consumer spending, and our modelling is sufficient to tilt the growth outlook for the second half from one of the modest contractions to one of the modest growth,” he added.