JPMorgan is dialing back its recession forecast following President Donald Trump’s temporary tariff rollback on Chinese imports. The bank now estimates the chance of a U.S. recession in 2025 has dropped below 50%, down from a 60% likelihood previously projected.
The shift came in a Tuesday note from JPMorgan Chief U.S. Economist Michael Feroli, who credited Trump’s 90-day pause on aggressive China tariffs as a stabilizing move. The agreement reduced most tariffs from 145% to 30% and triggered a surge in market optimism. Feroli stated the scaled-down tariffs “should reduce the risk that the U.S. economy slips into recession this year,” though he cautioned risks remain elevated.
Markets responded positively. The Nasdaq soared 4%, launching a new bull market. The S&P 500 and Dow Jones also climbed, rising 3.3% and 2.8%, respectively. Lower-than-expected inflation at 2.3% added to the momentum.
Trump’s trade pause followed his surprise tariff hike during “Liberation Day” last month. While JPMorgan had been caught off guard by the initial announcement, the new agreement has led to improved economic forecasts. The bank now predicts 0.6% GDP growth in 2025, up from just 0.2%, and projects core inflation to ease to 3.5% from 4%.
Still, JPMorgan warns against overconfidence. Labor demand is expected to decline further, and the firm anticipates a modest job contraction later this year. The Federal Reserve is also expected to delay interest rate cuts until December.
President Trump hailed the agreement, saying China’s decision to “fully open” its market would benefit both nations. However, he warned that tariffs could climb again if negotiations stall — though they would not return to previous levels.
The temporary tariff rollback is seen as a strategic win for President Trump, offering economic relief without conceding long-term leverage in trade talks. Economists note that the move could buy critical time for U.S. businesses and consumers as broader negotiations with China continue.
