Jamie Spencer
The likelihood of a U.S. recession in 2025 has increased to approximately 40%, with potential long-term consequences for the country’s investment standing, according to J.P. Morgan’s chief economist Bruce Kasman. Speaking in Singapore on Wednesday, Kasman emphasized growing concerns about U.S. economic stability.
Heightened Concerns Over Economic Growth
Kasman noted that while J.P. Morgan has not yet adjusted its official forecasts, recession risks have risen significantly from 30% earlier this year. The bank currently projects U.S. GDP growth at 2% for 2025. However, the risk could climb above 50% if President Donald Trump follows through with the next wave of tariffs set for April.
Market Jitters and Economic Downgrades
U.S. stock markets have recently suffered sharp declines, reflecting investor anxiety over Trump’s aggressive trade policies. A Reuters poll revealed that 95% of economists across Canada, Mexico, and the U.S. believe recession risks have escalated due to these tariffs.
Goldman Sachs and Morgan Stanley have downgraded their U.S. growth forecasts, now expecting GDP expansion of just 1.7% and 1.5%, respectively, this year.
Investor Confidence at Risk
Kasman warned that continued uncertainty around the administration’s economic policies could undermine trust in U.S. governance and markets. He pointed to concerns about unexpected government interventions, institutional cutbacks, and diminished global leadership.
“The U.S. has historically benefited from investor confidence in its rule of law and market transparency,” Kasman said. “If that erodes, it could have significant structural consequences for capital flows and the dollar’s attractiveness.”
Long-Term Consequences
J.P. Morgan highlighted the concept of the U.S.’s “exorbitant privilege”—the country’s ability to finance deficits at lower costs due to global confidence in its financial system. Kasman cautioned that ongoing policy disruptions could put this advantage at risk.
“If trust in U.S. institutions weakens, it could lead to higher borrowing costs and a reevaluation of dollar-denominated assets,” he said. “This is a structural risk that should not be underestimated.”
