Recession odds rise to 49% as tariffs shake markets

The likelihood of a U.S. recession in 2025 has surged to 49%, driven by President Donald Trump’s newly announced “Liberation Day” tariffs.

Prediction markets like Polymarket have seen significant activity, with over $1.1 million wagered on the outcome, reflecting growing economic concerns.

On April 2, Trump unveiled sweeping tariffs, including a universal 10% duty on all imports and higher rates for key trading partners such as China (34%), the European Union (20%), and Japan (24%).

The administration framed the policy as a corrective measure for trade imbalances and protection for American workers.

However, economists warn of potential global economic disruptions.

The financial markets reacted sharply to the announcement.

On April 3, the Dow Jones Industrial Average plunged 1,630 points, marking one of its worst single-day losses in years.

The S&P 500 and Nasdaq Composite also experienced severe declines, while the cryptocurrency market shed over 5% of its value, with Bitcoin (CRYPTO:BTC) falling by 6.7%.

Polymarket’s prediction market shows a dramatic rise in recession odds.

The probability of a U.S. recession stood at just 39% on March 31 but jumped to 49% following the tariff announcement.

The betting platform’s comment section has become a hub for political debates, with critics blaming the administration's policies for economic instability. 

Economists have raised concerns about the broader implications of these tariffs.

Yale’s Budget Lab estimates that rising costs from the tariffs could increase annual expenses for American households by $2,700 to $3,400.

Additionally, higher input costs and strained supply chains could slow consumer spending and dampen economic growth.

Financial institutions are also revising their forecasts.

JPMorgan recently increased its recession probability estimate to 40%, citing Trump’s trade policies as a major risk factor.