Where does the US economy go?

US President Donald Trump’s harsh customs duty measures for imports led to an uneasiness in the financial markets, while JPMorgan Chase published an updated economic view report for April 2025. The report emphasized that the US economy entered a serious slowdown process.

JPMorgan, the United States for 2025 real GDP growth forecast from +1.3 percent to -0.3 percent attracted. This harsh revision points to the size of the expected contraction in the economy. The report also predicted that the unemployment rate will rise to 5.3 %. The main reason for this increase is the weakening of economic activity.

Due to the newly applied customs duties, the estimation of Core PCE PCE (Core PCE), which measures price increases in basic goods and services, was also revised upward. JPMorgan predicts core PCE inflation for 4.4 %for the end of the year. This increase of 1.4 points compared to the previous prediction indicates that inflation is above expectations.

The report states that the FED can start interest rate cuts as of June. JPMorgan estimates that interest rate reductions will be reduced at each meeting until January 2026 and that the federal funding interest rate may decrease to 3.0 %of the upper limit of the federal funding interest. However, it is stated that the actual risk is not an early step, but a possible delay.

New customs duties are expected to respond with retaliation measures, especially major trade partners such as China. This brings the risk of a decrease in US exports. In addition, high inflation is expected to erode real (inflation -free) revenues and cause households to cut their expenditures. Increased uncertainty environment, consumers, using their savings may remain abstaining to continue to spend.

According to JPMorgan, economic weakness will be more pronounced especially in the third and fourth quarters of the year. With the disappearance of temporary dynamics such as strong imports and stock accumulation in the first quarter, growth may weaken during these periods.

JPMorgan Chief Economist Michael Feroli considers the current painting as a classic “Stagflation” state: high inflation, low growth and increasing unemployment. However, Feroli states that the weakening in the labor market may alleviate the concerns of the FED on the fight against inflation, and that monetary policy may become more flexible if wage increases slow down.

*It is not an investment advice.