JP Morgan drops US recession risk below 50% as Trump strikes China trade deal

The firm had previously predicted that there was a 60 percent chance of recession taking place in 2025, but said on Tuesday in the wake of the deal with China, "The administration’s recent dialing down of some of the more draconian tariffs placed on China should reduce the risk that the U.S. economy slips into recession this year. We believe recession risks are still elevated, but now below 50%," JPMorgan Chief US Economist Michael Feroli wrote.

JPMorgan predicts that the US economy will grow by 0.6 percent in 2025, which is a large jump from their initial prediction of 0.2 percent growth. Feroli also predicts that inflation will rise less than expected because of the lowering of the tariffs.

The prediction comes as the Consumer Price Index report came out on Tuesday, indicating that the inflation rate lowered from 2.4 percent year over year in March to 2.3 percent in April. Additionally, the stock market rallied on Monday in reaction to the deal between the US and China.

President Donald Trump announced the deal on Monday after many details surrounding it had come out. The president said, “They’ve agreed to open China, fully open China. And I think it’s going to be fantastic for China. I think it’s going to be fantastic for us, and I think it’s going to be great for unification and peace," Fortune reported.

The note from JPMorgan added, “We still project a modest contraction in employment later this year, as labor demand is projected to slow even more than labor supply.”

The firm added, "Our updated labor market outlook is less demanding of immediate action to stem employment risks; for the Fed, we are pushing back the timing of the resumption of rate cuts from September to December.”