US recession odds approach 50% on prediction markets after Trump tariff plans
U.S. President Donald Trump pumps his fist as he arrives to delivers remarks on reciprocal tariffs during an event in the Rose Garden entitled "Make America Wealthy Again" at the White House in Washington, U.S. on April 2, 2025. (AFP Photo)
Prediction markets are signaling heightened concerns about a potential U.S. recession following President Donald Trump’s sweeping new tariff plan, with probability estimates exceeding 49% for the first time this year.
On Polymarket, a decentralized prediction platform, the “US Recession in 2025” contract saw its Yes shares soar to over 50 cents from 39 cents in less than 24 hours. The contract will resolve to Yes if the National Bureau of Economic Research confirms a recession before Dec. 31, or if the economy experiences back-to-back quarterly gross domestic product (GDP) contractions.
Kalshi, a U.S.-based regulated prediction market, shows similar concerns, with recession probability rising to 54% from 40%.
Financial markets have responded negatively, with S&P 500 futures trading 3% lower at publication time, indicating severe risk aversion on Wall Street. Bitcoin traded at $83,100, down 1.5% over 24 hours.
The tariffs announced Wednesday set a 10% base rate on all imports, with higher taxes on 60 nations identified as worst offenders. China faces the heaviest impact with a 34% levy on top of the existing 20% charge, bringing the total to 54%. The base tariffs take effect April 5, with higher reciprocal rates beginning April 9.
Trump’s liberation day tariffs might increase US inflation
While the Trump administration expects these measures to address persistent U.S. trade deficits, critics warn they could increase domestic inflation and trigger global instability if trading partners implement retaliatory measures.
Some analysts remain less concerned about a full recession. UBS stated in a blog post, “The threat of further tariff escalation remains a key concern, but our economic forecasts do not call for a recession in the US.”
The firm projects the economy will still expand “around 2%—its historical trend rate—this year,” though growth will be slower than last year.
Joseph Wang of fedguy.com suggested on X that “tariffs are dovish, and big tariffs are very dovish,” indicating the Federal Reserve might respond with interest rate cuts. Rates traders are already pricing in a higher probability of the Fed cutting benchmark borrowing costs in June, potentially restarting the easing cycle that began last September.
