Traders are ramping up bets on a U.S. recession this year, driven by market jitters surrounding President Donald Trump’s sweeping new tariffs. Prediction platforms Polymarket and Kalshi are both signaling recession odds above 50%—levels not seen since the start of 2025.
On Polymarket, the decentralized betting platform, the “US Recession in 2025” contract surged past 50 cents on the dollar for the first time, jumping from 39 cents in under a day. The contract pays out if the National Bureau of Economic Research confirms a recession before the end of the year and if two consecutive quarters of GDP decline are recorded.
Over at Kalshi, a regulated U.S. prediction market, the probability of a 2025 recession spiked to 54%, up from 40% just days ago.
The trigger behind the surge? Trump’s newly announced tariff regime. The plan introduces a blanket 10% tariff on all imports starting April 5, with harsher levies—up to 54% in China’s case—kicking in days later for nations labeled top trade offenders. The administration claims the tariffs will address America’s persistent trade imbalances, but markets are worried about the inflationary and economic fallout.
The response was immediate: S&P 500 futures fell 3%, while bitcoin dropped 1.5% to $83,100, highlighting broader risk aversion. Asian markets also slumped, and gold surged to new highs amid the uncertainty.
Market Fallout or Overreaction?
Despite the spike in fear, not everyone sees a deep downturn ahead. Some analysts suggest that while the tariffs may slow growth, they’re unlikely to push the economy into full-blown recession territory.
UBS, in a note to clients, said that while selective tariffs and retaliatory moves may dent growth, the U.S. economy is still expected to expand around 2% in 2025—roughly in line with its long-term trend.
Others argue the policy shift could even accelerate rate cuts from the Federal Reserve. Joseph Wang of FedGuy.com called the new tariffs “very dovish” in a post on X, pointing to his previous research that outlined how trade friction tends to push the Fed toward easing. While tariffs are inflationary by nature, he said their impact could be offset through currency dynamics and other tools.
Indeed, rate traders are now increasingly pricing in a Fed rate cut as early as June, anticipating that the central bank will aim to cushion the economy from potential fallout and prevent a broader labor market downturn.
As the dust settles, all eyes remain on China and other key U.S. trading partners to see whether retaliatory tariffs will escalate tensions—and potentially tip global markets into deeper turmoil.
