Global Economy and Recession Risk in 2025: The Looming Threat
Risk of Global Economic Recession High due to Trump's Tariffs, Economists Sound Alarm
Disquieting times lie ahead in the global economy, with a potential increase in recession risks and whispers of stagflation on the horizon, largely fueled by tariff policies, especially those implemented under the Trump administration and current U.S. policies.
Recession Risks in 2025: On the Doorstep
- J.P. Morgan's Foreboding: J.P. Morgan has notably upped the recession probability for 2025 to 60%, citing U.S. policies and tariffs as potential catalysts for an economic downturn [3].
- Economic Indicators signaling danger: Some experts prod that the U.S. recession risk levitates at around 50/50, pointing to various economic indicators that foreshadow ominous tendencies [5].
The International Monetary Fund (IMF) is more reserved, but still has raised the U.S. recession risk to 40%, up from 25% previously [1][4]. These numbers speak volumes about the uncertainty shrouding the global economic landscape.
Tariff's Bite: Economic Ramifications
- Negative Supply Shocks: Tariffs inflict negative supply shocks, causing resource reallocation, reduced competition, and inflated prices - a triple whammy hurting global trade and economic growth [2][3].
- Global Trade's Stutter Step: The global trade growth is projected to decelerate to 1.7% in 2025, partly due to increased tariffs and policy uncertainties [2].
- U.S. Tariff Policies: Even with some tariff pauses, overall effective tariff rates remain high. The U.S. has escalated tariffs on China to punitive levels, further aggravating economic stratums [2][3].
Stagflation: Return of a Nightmare
- Stagflation's Thread: Stagflation comes back to haunt us when economic growth stagnates while inflation soars. The current atmosphere, characterized by slow growth and mounting inflation projections, intensifies stagflation fears [2][4].
- Inflationary Pressures: The IMF has nudged global inflation projections up by roughly 0.1 percentage point for every year, hinting at ongoing price pressures [2].
- Shaky Global Outlook: Despite the slowdown, the global economy's growth is expected to exceed recession levels, but the possibility of stagflation lingers due to policy uncertainties and economic decline [2][4].
Bracing for a Recession
In such tense times, diversification emerges as a crucial strategy to lessen risks during potential economic downturns. This approach encompasses:
- Portfolio Diversification: Distributing investments across various asset classes and geographic regions.
- Alternative Residency: Exploring options for second residencies or passports to maintain mobility and opportunities.
- Currency Diversification: Managing currency risk through holding assets in various currencies.
On the quest for preserving wealth and securing economic agility, these tactics prove indispensable at keeping fear at bay when chaos unfurls.
- J.P. Morgan, a prominent financial institution, has significantly increased the probability of a recession in 2025 to 60%, attributing it to U.S. policies, including tariffs. [3]
- The U.S., in the context of global trade and business, is facing a 50/50 recession risk, as suggested by some experts, who point to various economic indicators foreshadowing negative tendencies. [5]
- Tariffs, politics-based trade barriers, have been causing negative supply shocks worldwide, leading to resource reallocation, reduced competition, and inflated prices, which severely harm global trade and economic growth. [2][3]
- Regarding the U.S.'s tariff policies, despite some pauses, the overall effective tariff rates remain high, and escalated tariffs on China have exacerbated economic strains. [2][3]
- Despite a projected growth rate exceeding recession levels for the global economy, the possibility of stagflation persists due to policy uncertainties, economic decline, and mounting inflation projections. [2][4]
