US Major Banks: "Recession Probability Increasing... Extreme Government Policy Risk"

JP Morgan raises recession probability from 30 to 40%

Morgan Stanley also forecasts recession probability from 25 to 30%

'Are we (the United States) heading into a recession?'

As Donald Trump's trade war raises the possibility of a recession, Wall Street is asking this question. The Wall Street Journal (WSJ) reported on the 10th (local time) that "major US investment banks are increasingly turning their economic outlooks more pessimistic."

Morgan Stanley: "30% chance of recession"

According to the report, JPMorgan Chase has raised the probability of the US economy falling into a recession this year from 30% to 40%. Bruce Kasman, JPMorgan's chief economist, assessed that "there is a significant risk that the US will fall into a recession this year due to extreme US administration policies."

Goldman Sachs raised the probability of a US recession within 12 months from 15% to 20%. Jan Hatzius, Goldman Sachs' chief economist, warned that "the recession probability could increase if the Trump administration continues to adhere to existing policies despite facing much worse indicators." David Mericle, chief economist, revealed in an interview with AP that he lowered this year's US economic growth estimate from 2.2% to 1.7%.

Morgan Stanley has already lowered its forecast for US real growth this year to 1.5% last week. The Personal Consumption Expenditure (PCE) price index is expected to remain at 2.5% in December, similar to the beginning of the year. Morgan Stanley Research said, "We have lost some confidence that the economy can avoid a recession, and the probability of a recession rose from 20% to 35% last week."

The previous day, US President Donald Trump did not rule out the possibility of a US economic slowdown while stating that he would proceed with his tariff policy. With growing anxiety due to Trump's aggressive tariff policy and the possibility of a federal government shutdown, concerns have grown in the market that the US economy could fall into a recession.

On the New York stock market, the tech-heavy Nasdaq fell 727.90 points (4.00%) to 17,468.32 on the 10th (local time). It has fallen nearly 14% from its all-time high last December, entering a deeper correction territory (10% drop from peak).

White House: "Tariff uncertainty will be resolved in April"

However, the Trump administration is currently cautioning against overinterpretation, saying it's just a 'temporary phenomenon.'

Kevin Hassett, Chairman of the White House National Economic Council (NEC), dismissed concerns about a recession that have been raised recently, predicting that uncertainty due to President Trump's tariffs would be resolved as early as next month. Appearing on CNBC, Hassett claimed, "This is something inherited from the Biden administration, and it's due to some seasonal factors occurring ahead of tariff impositions."

Hassett further explained, "(The GDP negative growth prediction) is just a very temporary phenomenon, mainly due to the effect of postponing investment after the presidential election." He asserted, "This trend will be resolved this month, and tariff uncertainty will be resolved in April."

Kim Dong-hyun, Reporter 3code@hankyung.com