US Recession Odds in 2025 Skyrocket to Over 61% Following Trump’s Tariff Order

The odds of a US recession in 2025 have surged dramatically on prediction markets, hitting 61% following the announcement of a sweeping tariff order signed by former President Donald Trump on April 2. This dramatic spike in recession expectations is a result of the broader economic ramifications stemming from Trump's executive decision, which has created uncertainty in both domestic and global markets.

Kalshi, a platform where traders bet on the likelihood of future events, defines a recession by the standard economic criteria of two consecutive business quarters of negative gross domestic product (GDP) growth, as determined by the United States Department of Commerce. Since March 20, the odds of a US recession have nearly doubled, aligning with similar predictions on other prediction markets like Polymarket, where the 2025 recession odds stand at 60%.

Odds of US recession in 2025 top 60% on the Kalshi prediction market. Source: kalshi

Market Chaos and Global Concerns

The dramatic increase in recession odds follows the market turmoil triggered by President Trump’s executive order, which imposed a 10% baseline tariff rate on all countries and introduced “reciprocal” tariff rates for trading partners that already levy tariffs on US import goods. This move immediately sparked a massive sell-off in the stock market, wiping out over $5 trillion in shareholder value in just a few days.

The ongoing market disarray has fueled fears that the global economy may be headed toward a prolonged bear market, with analysts warning of the potential for a drawn-out trade war. This could put further pressure on global markets and suppress the prices of risk assets, including cryptocurrencies.

Despite the chaotic market reactions, Trump remains optimistic about the long-term effects of his tariff strategy, asserting that it will ultimately strengthen the US economy by correcting trade imbalances. On April 3, Trump expressed confidence that the markets would eventually “boom,” downplaying the current sell-off as a temporary and necessary phase in the process.

Theories Behind the Market Crash

Adding an interesting twist to the situation, prominent asset manager Anthony Pompliano speculated that Trump's actions may be part of a broader strategy to force a recession in order to lower interest rates. Pompliano pointed to the decline in 10-year US Treasury bonds as evidence that the President’s market actions are achieving their goal. Interest rates on 10-year Treasury bonds dropped significantly from 4.66% in January 2025 to just 4.00% by April 5.

The stock market sell-off continues as stocks shed trillions in shareholder value. Source: TradingView

Trump has also publicly pressured Federal Reserve Chairman Jerome Powell to reduce short-term interest rates. In an April 4 post on Truth Social, Trump emphasized that “this would be a perfect time for Fed chairman Jerome Powell to cut interest rates,” further stoking speculation that the President is deliberately orchestrating market turmoil to facilitate lower borrowing costs.

Conclusion

The financial markets and broader economy now face a period of heightened uncertainty. As traders on platforms like Kalshi and Polymarket react to the evolving situation, the odds of a US recession in 2025 continue to rise, driven by the ripple effects of Trump’s tariff order and the potential for a prolonged trade conflict. While the President remains confident that his approach will pay off in the long run, immediate market instability and concerns about global economic consequences suggest a turbulent road ahead.