Will the US Tariffs Cause a Global Recession?
Written by
G. Brian Davis
Edited by
Zuri Anderson
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In April, the International Monetary Fund (IMF) lowered its global economic growth forecast from 3.3% to 2.8% for 2025. It also lowered its growth forecast for 2026 from 3.3% to 3%.
The global banking backstop also sees sharply lower GDP growth in the US, dropping its forecast from 2.7% to 1.8%. As for U.S. recession risk, it raised its odds from 25% to 40%.
The latest GDP data released on Apr. 29 by the U.S. Bureau of Economic Analysts also sounded alarm bells. The U.S. economy shrank at an annualized rate of 0.3% in the first quarter of 2025, after growing by 2.4% in the fourth quarter of 2024. Economists typically consider two consecutive quarters of shrinking GDP an official recession.
Will US tariff policies trigger a global recession? Keep an eye on the following.
What Analysts and Business Owners Foresee
Several global banks have raised their probability odds of recession. J.P. Morgan now foresees a 60% risk of recession in both the U.S. and the world at large, up from 40% before the “Liberation Day” tariff announcements.
They’re not alone. Reuters reports that S&P Global predicts a 30 to 35% chance of recession, while HSBC puts it at 40% and Goldman Sachs sees a 45% risk of U.S. recession.
On “Main Street,” small businesses also see recession risk exploding. An April survey by small business network Alignable found that 60% of the 8,000 businesses polled believe a recession looms on the horizon. Among Canadian businesses, that figure jumped to 70%.
In fact, they’re already seeing revenues fall. Nearly three-quarters (73%) report lower earnings today than a year ago.
Pre-Existing Risks
Greg Zakowicz, senior ecommerce expert at Omnisend, said that while tariffs alone couldn’t kick off a global recession, the stage is already set.
“The global economy wasn’t exactly in great shape to begin with, between heightened inflation, slowing consumer spending and business growth and high government debts,” Zakowicz noted. “Add tariffs to the mix, and a global recession becomes much more likely.”
Tariffs create a unique threat to the economy because it both boosts inflation and suppresses growth. That puts central banks between a rock and a hard place: If they cut interest rates to juice the economy, it also juices inflation.
“Central banks are already balancing on a knife’s edge between fighting inflation and avoiding economic slowdown,” explained Patrice Williams-Lindo, CEO of Career Nomad. “Tariff-driven inflation could force central banks to hold rates higher for longer, choking off growth.”
Trade Wars Cost All Sides
Trade wars don’t typically have winners — they just have countries who lose less money than others.
“As other nations retaliate with their own tariffs, we could see trade wars escalate into broader economic contractions,” adds Williams-Lindo.
Eugenia Mykuliak, executive director of global financial services provider B2PRIME Group, also sees enormous economic risk from tariff-induced trade wars.
“Larger and broader tariffs could disrupt global trade and supply chains, leading to higher costs and lower demand and investment activity,” he added.
Uncertainty Reduces Spending and Investment
When supply chains fray, it costs huge amounts of time and money to recreate them. Zakowicz notes that tariffs don’t just raise prices.
“They also mess with supply chains by making it more complicated — and expensive — to get the parts and materials needed for production,” he said. “Delays, higher costs and even moving operations to new countries become inevitable. All of this creates uncertainty about the future.”
What do consumers and businesses do in times of uncertainty? They pull back on spending and investment, which creates a feedback loop. Consumers buy less, which reduces business revenues. That causes companies to suspend projects and hiring, or even trim their existing workforce. Higher unemployment leaves consumers spending even less, and the recession gets deeper.
“Tariffs alone won’t cause a global recession,” summarizes Williams-Lindo. “But they could easily become the spark that ignites already vulnerable economies.”
More From GOBankingRates
Sources
- International Monetary Fund, “A Critical Juncture amid Policy Shifts.”
- U.S. Bureau of Economic Analysts, “Gross Domestic Product, 1st Quarter 2025 (Advance Estimate).”
- J.P. Morgan, “The probability of a recession remains at 60%.”
- Reuters, “Goldman Sachs raises odds of US recession to 45%, second hike in a week.”
- Alignable, “Biz Owners Say Recession Is Near.”
- Omnisend, “Ecommerce Email Marketing and SMS Platform.”
- LinkedIn, “Patrice Williams-Lindo.”
- B2Prime, “Leading Prime of Prime Liquidity Provider.”
