A 40% chance of a US recession this year and lasting damage to its investment destination status looms, warned J.P. Morgan chief economist Bruce Kasman. The economist attributes the increased risk to President Donald Trump’s potential imposition of reciprocal tariffs, which could further disrupt the economy.
Kasman notes that a heightened concern about the US economy has led him to revise his forecast, increasing the recession risk from 30% to 40%. He also warns that if Trump’s threats come to fruition, the recession risk would rise significantly, potentially reaching 50% or above.
The economist points to the potential undermining of trust in US governance as a key risk factor. Kasman believes that the administration’s style and policies could erode investor faith in US assets, including the dollar and markets. This concern is exacerbated by recent decisions, such as cutting government agencies and disbanding advisory committees, which may further damage the country’s standing.
The term “exorbitant privilege” has long described the US’s ability to finance its deficits at a lower cost due to greater capital flows and dollar attractiveness. However, Kasman warns that this privilege is under threat and could become a structural issue in markets if it starts to lose value.
Source: https://www.reuters.com/markets/us/jp-morgan-economist-sees-40-us-recession-chance-risks-exorbitant-privilege-2025-03-12