Wall Street Sounds Alarm Over Largest Tax Hike Since 1968
The U.S. economy is teetering on the edge of a recession following President Donald Trump’s sweeping new tariffs, experts warn. The announcement, made Wednesday, imposes a 10% or higher tax on most imports, sending shockwaves through Wall Street and prompting dire warnings from top economists.
JPMorgan: Recession Risks Are Real
Michael Feroli, chief U.S. economist at JPMorgan Chase, issued a stark warning in a note to clients, describing Trump’s move as a major threat to economic stability. “These tariffs push the economy perilously close to slipping into recession,” Feroli stated, signaling that the financial landscape could shift dramatically in the coming months.
His analysis predicts that real disposable income will shrink during the second and third quarters of 2025, leading to a dip in consumer spending. At the same time, personal consumption expenditures (PCE) are expected to rise by 1% to 1.5% this year, driving inflation to 4%—twice the Federal Reserve’s target of 2%.
The Biggest Tax Hike in Over Half a Century
Experts are drawing historical parallels to the Revenue Act of 1968, which temporarily raised income taxes by 10% to fund the Vietnam War. Feroli labeled Trump’s tariffs as the largest tax increase since that era, underscoring the economic weight of the decision.
The impact of these tariffs is staggering. Under the new policy, the average tariff rate on U.S. imports will soar to more than 23%, a level not seen since before World War I. This marks a fourfold increase from the sub-5% tariff rates that have defined global trade for the past three decades.
UBS Predicts a Full-Blown Recession
While JPMorgan warns of economic peril, economists at UBS go even further—forecasting a technical recession, where the U.S. economy contracts for two consecutive quarters.
Jonathan Pingle, chief U.S. economist at UBS, painted a grim picture: “Even before this tariff shock, the economy was showing signs of slowing. Fiscal support is fading, and consumer spending is tightening. This move could tip the scales into recession.”
Unemployment Set to Surge?
UBS also predicts a rise in joblessness, with unemployment potentially spiking to 5.5%, up from February’s 4.1%. A weakening labor market would add to the strain on American households, already grappling with high inflation and shrinking purchasing power.
What’s Next?
With Wall Street rattled and economic forecasts turning bleak, all eyes are on the Federal Reserve and policymakers. Will they intervene to soften the blow, or will the U.S. economy be left to weather the storm? One thing is clear: Trump’s tariff gamble has set the stage for a high-stakes economic showdown.
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Trump’s Tariffs Push U.S. Economy to the Brink, JPMorgan Warns