If you feel like the US economy has been in a will-they-won’t-they phase with a potential recession for far too long, you’re not wrong.
While the dreaded R-word has been looming over the economy for years, one top economist said this week that the risk of a recession has climbed to 90%. The last time the US was in a recession was in 2020, during the pandemic.
A recession, or a significant downturn in economic activity that lasts more than a few months, is typically defined as two consecutive quarters of negative Gross Domestic Product, or GDP. Negative GDP means the total value of goods and services produced is declining — in other words, the economy is shrinking.
Common recession indicators include a decline in GDP, a decline in real income, and a rise in unemployment.
President Donald Trump said China faces tariffs of up to 245%, and his administration has also imposed a widely applied 10% tariff. The announcements have fueled new concerns about the possibility of a recession, with economists warning about the potential impacts.
A first-quarter survey by Bankrate found that top economists believed a recession was becoming more likely. The survey found the odds of a recession occurring in the next 12 months was 36%, up from 26% in the last quarter of 2024 — and that was before Trump ramped up his trade war in April.
Here’s what leading economists have said lately about the likelihood of a recession.
Torsten Sløk, Apollo Global Management
Torsten Sløk is the top economist at Apollo Global Management, an asset-management firm based in New York. Sløk said in a note to Apollo clients over the weekend that there was now a 90% chance of the US entering into a “Voluntary Trade Reset Recession.”
“Tariffs have been implemented in a way that has not been effective,” Sløk said. “Small businesses that have for decades relied on a stable US system will have to adjust immediately and do not have the working capital to pay tariffs. Expect ships to sit offshore, orders to be canceled, and well-run generational retailers to file for bankruptcy.”
Sløk gave several reasons why a downturn for small businesses could have a large impact on the economy, including that they account for most American jobs and more capital expenditures, or investments in the economy, than large-cap firms.
“The bottom line: if the current level of tariffs continues, a sharp slowdown in the US economy is coming,” he said.
Adam Posen, Peterson Institute for International Economics
Adam Posen, economist and president of the Peterson Institute for International Economics, a Washington D.C.-based think tank, said last week that rising inflation was inevitable and there was a high chance of a recession as a result.
Posen said there was a 65% chance of the US economy sliding into a recession and that it could enter dreaded stagflation territory, in which inflation is persistent and growth is slow.
He also said the government seems unprepared to respond to the inflation he anticipates, and that the Fed has been “too loose” with monetary policy.
“If we get inflation, the Fed will be behind the curve,” he said.
Bill Dudley, former president of the New York Federal Reserve Bank
Bill Dudley, economist and former president of the New York Federal Reserve Bank, said earlier this month that stagflation could be the “best-case scenario” for the US economy.
In an op-ed for Bloomberg, Dudley said the White House’s tariff policy could lead to 5% inflation in the next six months.
“If companies pass along the cost of higher imports to consumers, inflation will be more persistent and the Fed less friendly. If they can’t, profit margins will shrink and earnings will underwhelm,” he wrote.”
“All told, stagflation is the optimistic scenario. More likely, the US will end up in a full-blown recession accompanied by higher inflation,” he continued.
Bruce Kasman, J.P. Morgan
J.P. Morgan said in a note last week that the bank believes the likelihood of the US entering a recession in 2025 was 60%.
“Even with the latest step-back from the draconian Liberation Day measures, what remains is still enough to push the US and China — and thus likely the global economy — into a recession this year,” Bruce Kasman, chief global economist at J.P. Morgan, said.
The note said the high tariff on China alongside the universal 10% tariff increased the average US tariff rate to 30% and that it amounted to $1 trillion, or 3% of GDP, “making it the largest tax increase on US households and businesses since World War II.”
“What remains is still enough to push the US and China — and thus likely the global economy — into a recession this year,” Kasman said, adding, “Another important concern is that sustained restrictive trade policies and reduced immigration flow may impose lasting supply costs, which will lower US growth over the long run.”
But the US could still avoid a recession, some say
Strategists at Wells Fargo said earlier this month there were some key signs that the US could avoid a recession in 2025.
While the bank lowered its GDP growth expectations, it said some economic pullback could be a correction from a strong 2024.
“Key economic supports remain intact, in our view, and can limit the slowdown,” the strategists wrote. “We see fertile ground for a moderate second-half growth recovery.”
Four positive signs included steady income growth, an increase in household wealth, long-term interest rates being down, and that financial markets remain liquid.
John Stoltzfus, the chief investment strategist at Oppenheimer, a New York-based investment bank, lowered his S&P 500 performance expectations but said he thinks the US will still avoid a downturn.
“When the tariffs were introduced, it all looked a lot harsher than we had expected,” Stoltzfus recently told Business Insider’s James Faris.
But Stoltzfus said he does not think the US is heading toward a recession, and pointed out that recession warnings in recent years have been wrong.
Stoltzfus, who is generally more bullish on stocks and the economy, said he thinks financial markets are wrong about Trump’s trade policy.
“We don’t think it’s an end of globalization,” he said. “We think the endpoint of this is just re-globalization with benefits for both developed and emerging markets outside of the US, to pick up some of the business that has been dedicated to China for so many years.”
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