After JPMorgan, Barclays, and BofA sound alarm on U.S recession following Donald Trump's stiff tariffs, here's what you need to know

Major banks such as JPMorgan, Barclays, and Bank of America are sounding warnings over the prospect for a recession across the globe following US president Donald Trump's latest imposition of high tariffs, reported CNBC. JPMorgan said that if the tariffs remain imposed for long, it might lead the United States and the world into a recession, according to the report.

JPMorgan's Economic Forecast

On Thursday, JPMorgan's economists warned that Trump's tariffs, if imposed in full, had the potential to harm economic growth and push inflation upward, as per CNBC. With the new tariffs beginning at 10% and rising for some nations, the US tariff level would jump to 25%, a level which economists claimed would have profound implications for the economy, according to the report.

According to the bank, the tariff hike would account for around 2.2% of GDP and it would add nearly 2% to the consumer price index, reported CNBC.

Global Fallout

JPMorgan's global economist Nora Szentivanyi said that, “We view the full implementation of these policies as a substantial macro economic shock not currently incorporated in our forecasts,” as quoted in the report.

She claimed that this shock might be magnified by its impact on sentiment and through the retaliation of countries with significant rises in their tariff rates, as per CNBC. Szentivanyi emphasized, “We thus emphasize that these policies, if sustained, would likely push the US and global economy into recession this year,” quoted CNBC.

Outlook Unchanged

However, JPMorgan has not made any changes to its forecasts yet because it is waiting to see how the policy will be implemented in the coming days, reported CNBC.

Market Reaction

Nonetheless, Trump’s tariffs worried investors as the Dow Jones Industrial Average futures fell over 1,200 points on fears of a global trade war on Thursday morning, according to the report.

FAQs

Why are global banks concerned?
Global banks are worried that Trump's new tariffs could lead to a recession worldwide, hurting economic growth and increasing inflation, as per CNBC.

How much could the tariffs impact US GDP?
JPMorgan forecasted a 2.2% reduction in US GDP if the tariffs are fully implemented, as per the report.