U.S. Recession Odds Exceed 50% in Prediction Markets Following Tariff Announcement
Concerns about a U.S. recession are rising following President Trump's tariff plan, with prediction platforms Polymarket and Kalshi showing increased fears of economic downturn.
- Polymarket indicates a greater than 50% chance of recession this year for the first time since the contract began trading.
- The contract will resolve to Yes if the NBER confirms a recession by December 31, requiring back-to-back quarterly GDP contractions.
- Kalshi shows a rise in recession probability for 2025 from 40% to 54%.
- Financial markets may react negatively, impacting risk assets like bitcoin, which traded at $83,100, down 1.5% in 24 hours.
The new tariffs include a base rate of 10% on all imports, with higher rates for 60 nations, including a 34% levy on China, raising its total to 54%. Tariffs take effect on April 5, with higher rates starting April 9.
- The Trump administration anticipates these tariffs will address trade deficits but could increase domestic inflation and global instability.
- Observers suggest the uncertainty might lead to an economic slowdown rather than a full recession.
- UBS forecasts a 2% growth in the U.S. economy this year despite selective tariffs and counteractions.
- Some analysts believe the initial market reaction could be temporary, driven by expectations of Federal Reserve interest-rate cuts.
Traders are increasingly betting on Fed rate cuts beginning in June, potentially restarting the easing cycle initiated last September.