Trump's Tariff Policy Pushes Recession Odds to 56% on Prediction Markets
by Maisie Morrison · BlockonomiTLDR
Table of Contents
- Trump announced a 10% blanket tariff on all US trading partners
- Prediction markets show 50-56% chance of US recession by end of 2025
- Markets reacted negatively with Nasdaq down 6% and S&P 500 down 5%
- Economists warn tariffs will increase inflation by approximately 1 percentage point
- Low-income households could face $1,000 in additional annual costs
President Donald Trump’s announcement of a blanket tariff policy has caused prediction markets to show higher odds of a US recession by the end of 2025. The policy, unveiled on April 2 during a White House Rose Garden ceremony, calls for a 10% blanket tariff on all US trading partners.
Prediction markets showed an immediate reaction to the news. Polymarket now shows a 50% chance of recession by year-end, up from 40% before the announcement. Kalshi puts those odds at 56%, up from 43%.
Crypto-native platform Myriad Markets, which launched after the announcement, shows a 53.6% chance of recession. These rising odds reflect growing concern about the economic impact of the new policy.
Market Reaction and Economic Warnings
Financial markets reacted strongly to the tariff news. The tech-heavy Nasdaq closed down nearly 6% while the S&P 500 fell about 5% on Thursday. Bitcoin and major altcoins also plummeted, with digital assets losing over $200 billion in market value.
Trump described the tariffs as a policy that would “give us growth like we’ve never seen before.” He stated the measures would rectify unfair practices by US trading partners and boost economic growth.
Many economists disagree with this assessment. They warn the policy could make goods more costly while slowing global economic growth. Ashish Shah from Goldman Sachs Asset Management described it as “a growth shock” that will “be a hit to US consumers.”
The Economist magazine was more direct in its critique. It called the policy “the most profound, harmful and unnecessary economic error in the modern era.”
Inflation Concerns and Consumer Impact
Economists predict these tariffs will boost inflation by around 1 percentage point by year-end. This would push inflation close to 4% from its current level. Gregory Daco, chief economist at EY, estimates the price increases could add $1,000 in annual costs for low-income households.
Consumer goods manufactured in countries like China and Vietnam face particularly high tariff rates of 34% and 46% respectively. This includes popular products like Apple iPhones and clothing.
Recent economic indicators already show concerning trends. The March Purchasing Managers’ Index revealed prices increasing at their fastest rate since mid-2022 and factory activity contracting. The Conference Board’s consumer confidence index dropped to its lowest level in four years.
Mark Zandi of Moody’s Analytics warns that if US tariffs trigger retaliatory measures from other nations, “serious recessions” could emerge both in the US and globally. In such a scenario, US GDP might drop by 2% and unemployment could rise to 7.5% from its current 4.1%.
Oxford Economics noted the announced tariffs will raise the effective US tariff rate to nearly 30%, matching levels not seen since the 1930s. Their economic model forecasts US GDP growth at just 1.4% with core inflation rising to 3.9% this year.
Economists from Deutsche Bank estimate these actions could reduce growth by 1-1.5 percentage points this year while adding a similar amount to core inflation. They warn, “Recession risks will likely rise materially if these tariffs are sustained.”
Morningstar’s chief US economist Preston Caldwell offered perhaps the starkest assessment, calling the tariffs “a self-inflicted economic catastrophe for the US” if maintained.
The full impact remains uncertain. Much depends on whether the Trump administration maintains all tariffs or offers exemptions for certain products or nations. For now, prediction markets and economists alike are signaling caution about economic prospects in the coming months.