Is a US Recession Looming? Prediction Markets Bet “Yes” After Trump Tariffs

Is a US Recession Looming? Prediction Markets Bet “Yes” After Trump Tariffs

TLDR:

• Trump announced a 10% blanket tariff on all US trading partners on April 2
• Prediction markets show 50-56% chance of US recession by end of 2025
• Markets reacted negatively with Nasdaq and S&P 500 falling 6% and 5% respectively
• Economists warn tariffs will increase inflation and slow economic growth
• Bitcoin and crypto markets lost over $200 billion in market value after the announcement

President Donald Trump’s recent announcement of new tariff policies has sent shockwaves through global markets, with prediction markets now showing a sharp increase in the odds of a US recession by the end of 2025. On April 2, dubbed “Liberation Day,” Trump unveiled a 10% blanket tariff on all US imports and additional reciprocal tariffs targeting 90 nations.

The impact was immediate on prediction markets. Polymarket now shows a 50% chance of a US recession by the end of 2025, up from 40% before the announcement. Kalshi, another prediction platform, places those odds even higher at 56%, compared to 43% previously.

Crypto-native trading platform Myriad Markets, which launched a day after Trump’s announcement, shows a 53.6% chance of a US recession. These rising recession odds reflect growing market concern about the economic impact of the new tariff policies.

Economic Concerns Mount

The tariffs have already triggered a market sell-off. The tech-heavy Nasdaq closed down nearly 6% while the S&P 500 dropped about 5% on Thursday. Bitcoin and other cryptocurrencies weren’t spared, with digital assets shedding more than $200 billion in market value.

Trump defended the tariffs during a White House Rose Garden ceremony. “They will give us growth, these tariffs like we’ve never seen before,” he stated. The administration claims the policy will revitalize American manufacturing, create jobs, and generate federal revenue.

But many economists disagree with this view. “We view this as kind of a growth shock… this is going to be a hit to US consumers,” said Ashish Shah, chief investment officer of public investing at Goldman Sachs Asset Management.

The Economist magazine was more blunt, calling the policy “the most profound, harmful and unnecessary economic error in the modern era.” These concerns are backed by recent economic indicators that point to trouble ahead.

Inflation and Consumer Impact

Economists warn that the tariffs could lead to stagflation – a painful combination of high inflation and low economic growth. Gregory Daco, chief economist at EY, predicts consumer prices could accelerate by 1 percentage point by year-end, pushing inflation close to 4%.

This increase could add $1,000 in annual costs for low-income households. Products ranging from Apple’s iPhones manufactured in China to clothing made in Vietnam could spike in price due to the reciprocal tariffs, with those nations facing rates of 34% and 46%, respectively.

“With the most tariff increases targeting countries central to the US supply chain for consumer goods — China, Vietnam, Taiwan and Cambodia — households should expect higher prices across a wide range of everyday items,” said Seema Shah, chief global strategist at Principal Asset Management.

Mark Zandi, chief economist at Moody’s Analytics, warns that if other nations retaliate with their own tariffs, “serious recessions” could emerge both in the US and globally. Such a scenario could reduce GDP by 2% and boost unemployment next year to 7.5%, up from its current rate of 4.1%.

Several major financial institutions have revised their economic forecasts downward. Oxford Economics predicts US GDP growth at just 1.4% with core inflation rising to 3.9% this year. Deutsche Bank estimates the tariffs could reduce growth by 1-1.5 percentage points this year.

Nationwide has revised down their real GDP growth estimate to a range of zero to 0.5% for Q4 2025, while Capital Economics puts the odds of a recession at about A poll from CBS News indicates most Americans think the president has focused too much on tariffs and not enough on lowering consumer costs.

The March Purchasing Managers’ Index showed prices increasing at their fastest rate since mid-2022 and factory activity contracting. Last week’s Conference Board’s consumer confidence index plunged to its lowest level in four years.

Despite these concerns, economists note the economy remains relatively strong, with low unemployment and steady growth. Much depends on whether the Trump administration maintains these tariffs or offers exemptions for certain products or nations.

The post Is a US Recession Looming? Prediction Markets Bet “Yes” After Trump Tariffs appeared first on CoinCentral.