Charles Esther
Several leading economists are sounding the alarm about a growing risk of a U.S. recession in 2025.
The warning comes as inflation remains a threat and the impact of aggressive tariff policies begins to ripple through the economy.
With uncertainty on the horizon, many experts now believe the odds of an economic downturn are climbing significantly.
A New Wave of Tariffs Sparks Concern
Recent trade policies, including former President Donald Trump’s proposed 245% tariff on China and a blanket 10% tariff on all imports, have sparked major concerns about economic consequences.
These measures are aimed at reshaping global trade, but economists warn they could lead to higher costs for businesses and consumers.
The first quarter of 2025 has already seen increased recession forecasts, with Bankrate reporting a jump in predicted recession odds from 26% in late 2024 to 36%.
And that was before the newest tariffs were even fully implemented.
Apollo’s Torsten Sløk Warns of a 90% Recession Risk
Torsten Sløk, chief economist at Apollo Global Management, has issued one of the strongest warnings yet.
In a recent note to clients, he said there is a 90% chance that the U.S. will enter a “Voluntary Trade Reset Recession.”
Sløk emphasized that small businesses, which form the backbone of the U.S. economy, are especially vulnerable to tariffs.
“These companies don’t have the working capital to adjust quickly,” he wrote.
He warned of canceled orders, shipping delays, and bankruptcies among long-standing businesses.
According to Sløk, if current tariffs remain, a sharp slowdown is inevitable.
Peterson Institute Predicts Stagflation
Adam Posen, president of the Peterson Institute for International Economics, echoed Sløk’s concerns.
He placed recession odds at 65%, citing persistent inflation as a key threat.
Posen believes the U.S. is at risk of entering stagflation — a combination of stagnant growth and rising prices.
He criticized the Federal Reserve for being too slow to act, warning that policymakers may not be ready to deal with the inflationary effects of tariffs.
“If we get inflation, the Fed will be behind the curve,” he warned.
Former Fed President Says Stagflation Might Be the Best-Case Scenario
Bill Dudley, former president of the New York Federal Reserve Bank, painted a bleak picture in a Bloomberg op-ed.
He argued that 5% inflation could hit within six months due to rising import costs.
“If companies pass these costs to consumers, inflation will persist,” he explained.
“If not, profit margins will shrink and earnings will disappoint.”
Dudley concluded that stagflation might be the best outcome — the worst being a deep recession with high inflation.
J.P. Morgan Pegs Recession Risk at 60%
J.P. Morgan’s chief global economist, Bruce Kasman, reported a 60% chance of a recession in 2025.
He highlighted that the combined effect of tariffs is equivalent to a $1 trillion tax hike — around 3% of U.S. GDP.
Kasman noted that the global economy could also suffer due to trade tensions with China.
He expressed long-term concerns that sustained restrictive trade policies could damage U.S. growth potential for years to come.
Some Experts Still See Room for Optimism
Despite growing fears, not everyone is convinced a recession is unavoidable.
Wells Fargo strategists recently noted that while GDP expectations have been lowered, the economy still shows signs of resilience.
They cited positive trends like steady income growth, increased household wealth, falling long-term interest rates, and healthy liquidity in financial markets.
“We see fertile ground for a moderate second-half growth recovery,” they wrote.
Oppenheimer’s Stoltzfus: No Recession in Sight
John Stoltzfus, chief investment strategist at Oppenheimer, remains more optimistic than his peers.
He believes the market has overreacted to tariff news and maintains that the U.S. will likely avoid a recession.
“We don’t think it’s an end of globalization,” Stoltzfus said.
“Rather, it’s a shift toward re-globalization — which may benefit other countries more than China.”
While he adjusted his S&P 500 forecasts, Stoltzfus argued that recent recession predictions have been wrong in previous years and may be again.
Conclusion
Although opinions differ, the consensus among leading economists is that the U.S. economy is facing growing risks.
Tariff-driven inflation, declining business confidence, and weakening global trade all contribute to a fragile outlook.
Whether 2025 brings a recession or not, businesses, investors, and consumers would be wise to stay alert and prepare for economic turbulence ahead.
