Wall Street brokerage JP Morgan increased the risk of a global recession to 60% this week after US President Donald Trump announced sweeping reciprocal tariffs. The firm cited “disruptive American politics” as being the “biggest risk to the global outlook” while increasing its projection from an earlier estimate of 40% in a research report that was somewhat ominously titled: ‘There will be blood’. The markets faced a fresh blow hours after the prediction as China retaliated with an extra 34% tax on US goods.

‘There will be blood’

“The risk of recession in the global economy this year is raised to 60%, up from 40%…The effect of this tax hike is likely to be magnified — through retaliation, a slide in US business sentiment, and supply chain disruptions,” wrote Chief Economist Bruce Kasman in a note to clients.

The firm calculated that the newly announced tariffs would cost US consumers approximately $700 billion. Kasman also noted that the levies were the largest tax hike on US households and businesses since 1968. JP Morgan had projected a 40% risk of recession till the end of March — up from 30% at the start of the year. Several other Wall Street firms also joined the brokerage in issuing recession warnings on Thursday while forecasting a return to pandemic-level inflation.

Wall Street continues freefall

US stocks opened sharply lower on Friday after China imposed fresh tariffs on all US goods in response to the Trump administration’s sweeping levies. The tech-heavy Nasdaq dropped more than 20% from its all-time closing high touched in December, putting it on course to confirm a bear market. The S&P 500 lost 134.05 points, or 2.48%, to 5,262.47 points, while the Nasdaq Composite lost 473.16 points, or 2.86%, to 16,077.44. The Dow Jones Industrial Average fell 994.46 points, or 2.45%, to 39,551.47.

Indexes enter bear market

“If the current slate of tariffs holds, a Q2 or Q3 recession is very possible, as is a bear market. The question is, does President Trump seek some sort of off-ramp for these policies if and when we see a bear market in the stock market,” said David Bahnsen — chief investment officer at The Bahnsen Group — earlier on Friday.

The tech-heavy Nasdaq Composite index was set to confirm it was in a bear market on Friday, down more than 20% from a recent record high. Investors have been fleeing riskier assets this week amid growing fears that the tariffs imposed by Trump could spark a trade war and tip the global economy into recession.

The update also came a day after the small-cap benchmark Russell 2000 became the first major US stock measure to enter the bear market.