As of April 2025, there is growing concern among economists and financial institutions about the possibility of the U.S. economy entering a recession. Goldman Sachs recently increased the probability of a U.S. recession occurring by the end of 2025 to 45%, citing escalating trade tensions and newly imposed tariffs as significant factors contributing to economic uncertainty.
Similarly, J.P. Morgan has adjusted its recession forecasts, raising the likelihood of a U.S. recession starting before the end of 2024 to 35%, with a 45% chance by the end of 2025. These adjustments reflect concerns over weakening labor demand and a loss of momentum in global manufacturing.
The implementation of new tariffs by the Trump administration has intensified these concerns. President Trump's recent imposition of a 10% baseline tariff on most imports has led to significant market volatility. While the administration temporarily postponed some tariffs following market turmoil, the overall uncertainty has led financial leaders, including JPMorgan Chase CEO Jamie Dimon, to warn of potential inflation and slower economic growth.
In light of these developments, Treasury Secretary Scott Bessent acknowledged on March 16, 2025, that the U.S. economy might enter a recession.
As of April 2025, the outlook for the U.S. economy presents a mix of optimism and caution among various institutions and analysts.
Positive Projections:
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Wells Fargo Investment Institute forecasts that the U.S. will lead the global economy in 2025, anticipating a GDP growth of 2.5% by year-end. This optimism is attributed to robust domestic expansion and favorable policy developments.
Moderate Expectations:
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The Conference Board anticipates a 2.3% growth in 2025, supported by improving credit conditions and rising stock prices. However, they also highlight risks such as weak manufacturing orders and low consumer confidence that could pose challenges to this growth.
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The International Monetary Fund (IMF) has raised its U.S. growth forecast for the current year to 2.8% but expects a slowdown to 2.2% in 2025, citing factors like reduced government spending and a cooling job market.
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The Congressional Budget Office (CBO) projects a gradual decline in economic growth, with GDP growth cooling from an estimated 2.3% in 2024 to 1.9% in 2025 and 1.8% in 2026. This slowdown is attributed to higher unemployment and lower inflation.
Cautious Outlooks:
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St. Louis Federal Reserve President Alberto Musalem foresees U.S. economic growth falling "materially below trend," citing factors such as new import tariffs, declining household and business confidence, and potential retaliation from trade partners. While he does not anticipate a recession, he expects growth to dip below the estimated 2% trend and unemployment to rise.
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Peter Berezin, Chief Global Strategist at BCA Research, predicts that a U.S. recession is beginning in April 2025. He argues that temporary tariff suspensions are insufficient to prevent the looming recession, pointing to reduced consumer spending and corporate layoffs as contributing factors.
Key Factors Influencing the Outlook:
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Trade Policies: The implementation of new tariffs and potential retaliatory measures from trade partners are significant concerns. President Trump's recent 90-day pause on certain tariffs has introduced uncertainty, with some analysts questioning the consistency and economic impact of these policies.
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Federal Reserve Policies: The Federal Reserve's decisions on interest rates are closely watched. In March 2025, the Fed maintained interest rates between 4.25% and 4.5%, expressing concerns over persistent inflation and economic uncertainty.
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Inflation and Employment: Persistent inflation above the Fed's 2% target and potential increases in unemployment are factors that could influence economic performance.
In summary, while some institutions project moderate to strong growth for the U.S. economy in 2025, others express caution due to potential headwinds from trade policies, inflationary pressures, and other economic uncertainties.
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