Traders are increasingly betting on a U.S. recession in 2025 following President Trump’s sweeping tariff announcement, with recession probabilities jumping sharply on key prediction platforms.
Polymarket’s “U.S. Recession in 2025” contract saw odds surge past 50% — up from 39% the day prior — while Kalshi recorded a similar spike, pricing the likelihood of a recession this year at 54%.
The market shift follows Trump’s announcement of a 10% base tariff on all U.S. imports, and significantly higher levies on exports from 60 countries, including a 34% hike on Chinese goods, bringing the total tariff on some Chinese imports to 54%.
The news rattled global markets. U.S. futures fell over 3%, and gold hit another record high. Bitcoin slipped to $83,100, down 1.5% in 24 hours, erasing gains from earlier in the week.
Traders are concerned the aggressive tariffs could escalate into a global trade war and raise inflation, putting pressure on corporate margins and consumer spending.
Still, some economists argue a full-blown recession is not guaranteed. UBS said in a note that while tariffs may slow growth, the U.S. economy could still expand by 2% this year.
Meanwhile, speculation is mounting that the Federal Reserve could cut rates as early as June, especially if economic data starts to deteriorate.
“Tariffs are inflationary, but they’re also dovish,” said Fed watcher Joseph Wang. “If growth slows and confidence falters, the Fed will act.”
Markets now await both retaliatory steps from global trade partners and the Fed’s response as economic uncertainty rises.
