New Delhi [India], April 5 : J.P. Morgan has predicted that the United States economy will likely fall into a recession this year, largely due to the impact of new tariffs announced by President Donald Trump.
In a note to investors released on Friday evening, the firm's chief U.S. economist, Michael Feroli, said that the country's gross domestic product (GDP) is expected to contract "under the weight of the tariffs."
According to a report by news website The Hill, Feroli added that the recession is also forecasted to "push the unemployment rate up to 5.3 [percent]."
This gloomy outlook came shortly after President Trump announced, on April 2, the imposition of reciprocal tariffs on many countries. The move is part of his administration's attempt to rebalance trade relationships with major U.S. trading partners.
Federal Reserve Chair Jerome Powell also expressed concern about the potential impact of these new tariffs.
Speaking on Friday at a business journalism conference, Powell said the new tariffs would cause much greater damage and possible economic damage than previously expected. He noted that this development could make the Federal Reserve's efforts to control inflation more difficult.
"While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected. The same is likely to be true of the economic effects, which will include higher inflation and slower growth," Powell said.
According to President Trump's tariff plan, a 10 percent tariff will be applied to imports from all countries starting April 5. Additionally, from April 9 onwards, countries with the largest trade deficits with the U.S. will face higher, individualised tariffs. India is one of the countries affected, with a 26 percent tariff imposed on all its exports.
Despite this, global brokerage firm Jefferies offered a more positive view regarding the impact on India. The firm noted that key Indian export sectorssuch as information technology (IT) services, pharmaceuticals, and automobilesare not directly impacted by the new tariffs.
Jefferies described the 26 percent tariff as "reasonable" when compared to tariffs on other countries.
However, the firm also cautioned that the broader economic slowdown in the U.S. could still hurt Indian exports, especially in sectors like IT services.
"The 27 per cent (now corrected in a document to 26 per cent) tariff on India is looking reasonable from a relative perspective. Bigger worries are on weaker US economic outlook, which is a -ve for IT services and other exporters. However, it warned that a weakening US economy could hurt demand for Indian exports, especially in IT services," Jefferies said.
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