JPMorgan Chase & Co. has predicted that the US economy will fall into recession this year, mainly prompted by the effect of newly announced tariffs by President Donald Trump, The Hill reports.

In a letter to investors published on Friday night, JPMorgan’s chief US economist Michael Feroli cautioned that the nation’s gross domestic product (GDP) is going to contract. “We now forecast real GDP to decline under the burden of the tariffs, and for the year as a whole (4Q/4Q) we now forecast real GDP growth of -0.3%, down from 1.3% earlier,” Bloomberg quoted Feroli as saying.

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The note also anticipated an increase in unemployment. According to The Hill, Feroli added that the downturn ‘is also predicted to drive the unemployment rate to 5.3 per cent’.

President Trump announced on Wednesday a broad set of tariffs aimed at US trading partners, including India. The development sent shockwaves through the stock market, bringing the S&P 500 index to an 11-month low. The market lost value by $5.4 trillion in just two trading sessions.

Other Banks Follow

JPMorgan’s warning is consistent with other major banks’ similar revisions. On Thursday, Barclays Plc also forecast that the US economy would shrink in 2025, stating this was ‘consistent with a recession’. Citi economists cut their 2025 growth forecast to just 0.1% the following day, while UBS economists lowered theirs to 0.4%.

UBS’s head US economist, Jonathan Pingle, stressed the magnitude of the situation. “We anticipate US imports from the rest of the world decline more than 20% over our forecast horizon, largely in the next few quarters, reducing imports as a percentage of GDP to pre-1986 levels,” he said. “The brusqueness of the trade policy response suggests significant macroeconomic adjustment for a $30 trillion economy,” he added.

Fed to Start Cutting Rates in June

With economic pressure mounting, Feroli foresees the Federal Reserve starting to cut interest rates as soon as June. He sees cuts at all meetings all the way up to January and could see the benchmark rate fall to 2.75%–3% from 4.25%–4.5% currently, according to Bloomberg.

Interestingly, these rate cuts are expected even though inflation is projected to rise. Feroli estimates a key inflation gauge will increase to 4.4% by the end of the year, compared to the current 2.8%.

Federal Reserve Chairman Jerome Powell also expressed concerns about the new tariff policy. During a business journalism conference on Friday, he explained that the tariffs have the potential to inflict “much greater damage and possible economic damage than anticipated.” He noted that this shift might make it more difficult for the Fed to manage inflation.

India Among Nations Affected by Steep Tariffs

As part of Trump’s retaliatory tariff scheme, beginning April 5, all nations shipping to the US will be subject to a 10% tax. Beginning April 9, the nations with the largest trade deficits with the US will experience further, customized tariffs. India, in particular, will experience a 26% tariff on all of its shipments.