Recent developments in the U.S. economic landscape have raised eyebrows, with traders on the Kalshi prediction market estimating the odds of a recession in 2025 at 61%. This projection comes in the aftermath of President Donald Trump’s sweeping tariff order, signed on April 2, which has significantly impacted market sentiment.
The criteria set by Kalshi for determining a recession—two consecutive quarters of negative gross domestic product (GDP) growth—suggest that traders are increasingly wary of a downturn’s possibility as economic indicators fluctuate.
Since March 20, the odds of a recession have nearly doubled, aligning closely with the current sentiment on Polymarket, where a 60% chance of recession in 2025 is noted. The grim macroeconomic outlook appears to be fueled by apprehension stemming from Trump’s executive actions and the resulting capital market sell-offs, culminating in fears of a protracted bear market.
Odds of a US recession in 2025 top 60% on the Kalshi prediction market. Source: Kalshi
The implications of Trump’s executive order are profound, establishing a baseline 10% tariff rate on all countries and reciprocal tariffs on those nations already imposing restrictions on U.S. imports. This move was met with an immediate sell-off in the stock market, which lost over $5 trillion in shareholder value almost overnight. Analysts are concerned that ongoing fears of recession could foster a prolonged trade war, adversely affecting global markets and risk assets, including cryptocurrencies.
Despite the turmoil, Trump remains optimistic about the long-term benefits of the tariffs, asserting that they will ultimately strengthen the U.S. economy and rectify trade imbalances. “The markets are going to boom,” he claimed on April 3, suggesting that the current instability is merely a temporary setback in a larger economic strategy.
The stock market sell-off continues as stocks shed trillions in shareholder value. Source: TradingView
Market analyst Anthony Pompliano has posited that Trump’s aggressive tariffs might be a strategic maneuver to deliberately crash markets and prompt a drop in interest rates. The decline in 10-year U.S. Treasury bonds from approximately 4.66% in January to around 4.00% by early April lends some credence to this theory, suggesting a shift in monetary policy might be forthcoming.
In the midst of these developments, Trump has called for the Federal Reserve to lower interest rates, stating, “This would be a perfect time for Fed chairman Jerome Powell to cut rates,” echoing sentiments for urgent monetary easing as economic pressures mount.
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The clarity surrounding these rapidly changing conditions is crucial for both investors and policymakers as they navigate potential headwinds in the U.S. economy heading into 2025.
