On April 3, the likelihood of a U.S. recession in 2025, as predicted by Polymarket, saw a dramatic spike to 53%.
This sharp increase represents the most significant one-day rise in recession probability for the year. The shift follows the announcement of a controversial new trade policy that includes broad tariffs on imports and could have significant implications for the U.S. economy.
New Trade Policy: Tariffs and Economic Impact
The centerpiece of this policy is the imposition of a universal 10% tariff on all imports, accompanied by reciprocal tariffs as high as 48% on goods from 60 countries. These measures eliminate previous exemptions that shielded categories such as raw materials, medical supplies, and critical industrial inputs from tariffs. The goal of the policy is to create leverage in international trade negotiations and support domestic manufacturing, but it has sparked significant concerns among economists and investors.
Compounding Economic Strains
Economists are warning that the policy could exert a compounded impact on the economy, exacerbating existing issues such as rising input costs, strained supply chains, and weakening consumer demand. The tariffs are expected to pass on higher costs to consumers, particularly affecting goods like electronics, automotive parts, and construction materials. With core inflation already high and interest rates remaining elevated, these added price pressures could further dampen disposable income, especially for lower-income households. The end result could be a slowdown in consumer spending and a stalling of economic growth.
Supply Chain Vulnerabilities and Long-Term Concerns
Another major concern is the heightened vulnerability of U.S. supply chains under the new tariff regime. Many of the targeted imports lack domestic production alternatives, and the shift to onshoring or nearshoring remains a challenging, long-term endeavor. This misalignment in supply and demand, coupled with the tariffs, has led to skepticism among investors about the practicality of the policy and its potential to achieve the administration’s goals of reindustrialization.
Inconsistencies in the Policy’s Justification
Despite the administration’s narrative around reindustrialization and leveraging trade relations, analysts have raised concerns about inconsistencies in the tariff figures cited to justify the reciprocal framework. These discrepancies, when compared to data from the World Trade Organization and the World Bank, have further fueled doubts about the policy’s credibility. This uncertainty has translated into increased volatility in markets like Polymarket, which tracks recession probabilities and other economic predictions.
Investor Sentiment and Recession Fears
The combination of rising costs, supply chain disruptions, and inflationary pressures has contributed to a shift in market sentiment, as reflected in Polymarket’s surge in recession odds. With investors now placing a higher probability on the U.S. entering a recession in 2025, the outlook for the country’s economic health in the coming years has become more uncertain.
As the trade policy begins to take effect, the broader economic consequences will likely become clearer. For now, however, the sharp increase in recession odds signals growing concern over the potential for sustained economic turbulence.
Kosta Gushterov
Reporter at Coindoo
Kosta has been a part of the team since 2021 and has solidified his position with a thirst for knowledge, incredible dedication to his work and a “detective-like” mindset. He not only covers a wide range of trending topics, he also creates reviews, PR articles and educational content. His work has also been referenced by other news outlets.
Source: https://coindoo.com/recession-odds-surge-to-53-amid-new-u-s-trade-policy/