JP Morgan "U.S. Tariff rate 10~20% likely... Recession avoided but shock inevitable"

JP Morgan's Multi-Faceted Analysis Of Market Impact Due To Tariff Changes (Source: AP)

Amid increasing uncertainty in trade policy after the U.S. Presidential Election, JP Morgan forecasted that the effective tariff rate in the U.S. could rise from 2% earlier this year to as much as 20%. Although significant economic impact is expected in this case, it predicted that a recession could narrowly be avoided.

According to major economic media such as Business Insider and Benzinga on the 17th (local time), JP Morgan recently analyzed the future of U.S. tariff policy with three scenarios in a report. Among them, it evaluated that the possibility is highest for the effective tariff rate to rise to the 10-20% range.

JP Morgan explained that this scenario is higher than the current 2%, but it falls within the expected range of the reciprocal tariff policy mentioned by President Donald Trump on ‘American Independence Day’. Such a level of tariffs could cause side effects like a decline in U.S. economic growth rate, a rise in unemployment rate, and increased price pressure, but it is analyzed not to be significant enough to cause a recession.

The second scenario is where the tariffs are fully imposed and major trading countries strongly oppose it, pushing the U.S. effective tariff rate to exceed 20%. JP Morgan expected that in this case, the entire global economy, including the U.S., would fall into recession. Consequently, global stock markets could experience a double-digit plunge, and the price of gold, considered a safe asset, could hit record highs with potential for further increases.

Conversely, the least likely scenario is where tariff hikes continue to be delayed or suspended, keeping the effective tariff rate below 10%. In this scenario, global stock markets could surge more than 20%, and industries that have been affected might see the greatest benefits.

JP Morgan stated, “Currently, it is a very fluid time with policy direction not yet confirmed,” and added, “None of the three paths can be ruled out.” It further advised that investors should strengthen portfolio diversification and risk management strategies in preparation for potential market volatility expansion.