Amid the trade war launched by U.S. President Donald Trump, market expectations for a recession in the American economy have intensified. According to JPMorgan Chase & Co., the Russell 2000 index, which tracks small-cap companies, reflects a 79% probability of a recession. Meanwhile, corporate bond investors remain relatively calm, despite the risk of worsening liquidity.
According to JPMorgan’s analytics panel, the S&P 500 reflects a 62% probability of recession, metals 68%, and five-year U.S. government bonds 54%. The highest reading comes from the Russell 2000 index, which, as bank strategist Nikolaos Panigirtzoglou notes, is more sensitive than others to cyclical economic fluctuations. He says a mild recession is already almost fully priced into current valuations.
Stock Market Crashes After White House Statements
On Tuesday, the U.S. stock market reversed from its biggest rally since 2022 to a sharp decline after the Trump administration announced 104% tariffs on Chinese goods. As a result, the S&P 500 lost nearly 3%, approaching bear market territory.
JPMorgan estimates recession probability by comparing pre-crisis asset peaks with lows during downturns. The bank suggests that such pessimistic expectations could lower the threshold for potential recovery — should any positive news on the economy or policy arise.
Credit Market Lags in Reaction
Despite sharp moves in equities, the recession probability priced into investment-grade corporate bonds stands at only 25%. That’s higher than in November 2024, when the figure was zero, but still well below other segments.
According to Panigirtzoglou, credit investors don’t yet believe a crisis is imminent: corporate fundamentals remain strong, and historically, the debt market has more often been right in assessing risks. However, if the trade war escalates, capital outflows from the bond market may occur, increasing pressure on the financial system.
Against this backdrop, the primary market for investment-grade corporate bonds resumed operations on Tuesday — for the first time since the tariff-induced crash.
Economists Revise Forecasts
According to a Bloomberg survey conducted April 2–3, 92% of economists believe Trump’s tariff policy increases the risk of a U.S. recession within the next year. JPMorgan economists led by Bruce Kasman raised their estimate for the probability of a global recession to 60%. The bank’s chief U.S. economist, Michael Feroli, lowered his forecast for real GDP growth in the country from 1,3% to–0,3%.
Trump Escalates and Mocks Critics
On Tuesday evening, Trump declared that world leaders frightened by his tariffs were “kissing his a**” in attempts to negotiate. Speaking at a Republican Congressional fundraising event, he claimed that other countries “are calling and begging” him to lift the tariffs and called his trade policy “legendary.”
In his speech, he exaggerated the “pleas” of world leaders in mocking tones, imitating submissive begging: “Please, sir, make a deal. I’ll do anything you say.”
Trump also described the first 100 days of his presidency as “the most successful in the country’s history,” despite the global market drop, protests in the U.S., and Republican discontent at town hall meetings.
Democrats Push for Vote to Repeal Tariffs
While Republicans are not yet openly opposing the president, Democrats in Congress have initiated a process to force their colleagues to take a side. New York Representative Gregory Meeks introduced a resolution to revoke the new tariffs announced by the White House. The document is expected to be reviewed within 15 days.
In parallel, Senate Democrats are preparing their own vote on repealing the global tariffs. Virginia Senator Tim Kaine stated that the process will begin after a two-week recess. Republican Rand Paul may support the initiative.
Some Republicans Express Concern
Republican senators, including Chuck Grassley and Thom Tillis, have voiced support for increasing congressional oversight of trade policy. They backed a bill by Senator Maria Cantwell requiring the president to justify new tariffs and obtain congressional approval. The White House has promised to veto the measure.
Tillis acknowledged that businesses in his state are starting to feel the impact of tariffs on raw material costs. Grassley reported that farmers are concerned about rising expenses. Senator John Cornyn said his constituents understand the need for “reciprocity,” though he admitted that the changes will bring “inevitable disruption.”
Wisconsin Senator Ron Johnson warned of bankruptcy risks for some companies. He said small businesses may lack access to essential imported goods, and tariffs will make their products uncompetitive.
Senator Josh Hawley stated that voters are “willing to give Trump a blank check” and see whether he can secure a favorable deal. Senate Majority Leader John Thune said the “consequences remain unclear” but expressed hope that Trump would extract concessions from other countries and the situation would prove temporary.
Meanwhile, according to Forbes, Donald Trump’s net worth has dropped by $500 million in less than a week since the tariff announcement. The primary hit came to his stake in Trump Media and Technology Group, whose stock fell 8% over three days, reaching its lowest point since October.
This post is for informational purposes only and is not an ad or investment advice. Please do your own research making any decisions.
