Jpmorgan reduces recession expectations after Trump’s tariff truce with China

JPMorgan reduced its expectations for the possibility of the US economy to enter this year after the president Donald Trump He reached a deal to reduce the definitions imposed on the goods imported from China temporarily.

The President announced on Monday that an agreement was reached to reduce the “mutual” tariff imposed to reduce the total tariff rate on Chinese goods from 145 % to 30 % for 90 days, while negotiators are working to finish a long -term agreement. The Chinese government, in turn, reduced its revenge tariff for American goods from 125 % to 20 % for a period of 90 days.

“The last contact in the administration with some of the most Drakaconia definitions that have placed on China reducing the risk of the US economy decline to recession this year,” wrote Michael Ferrolly, the chief American economist at JPMORGAN. “Conditioned at the current rates prevailing indefinitely, we are now expecting a real growth in this year’s GDP by 0.6 % (4Q/4Q), an increase of 0.2 % before the latest tariff news.”

“We believe that the recession risk is still added, but now less than 50 %,” Feli pointed out. The previous expectations of the company were developed Stagnation This year by 60 % in the days after the Trump administration’s “mutual” tariff declaration.

“De Miimimines” tariffs on China to 54 %

JPMORGAN analysis expect that the Personal Consumption Expenditure Index (PCE) – the preferred at the Federal Reserve Inflation scale – 3.5 % will be at the end of this year, less than 4 % estimate before the customs tariff stops, but higher than the projection is 2.2 % than the beginning of the year.

PCE reading will be much higher The goal of federal inflation From 2 %, which makes the Federal Reserve to delay reducing interest rates unless the labor market begins to deteriorate. The unemployment rate was 4.2 % in April, and JPMorgan reached the peak of the unemployment rate at 4.8 % in the second quarter of 2026.

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“We are still presenting a modest contraction at work later this year, as it is expected that the demand for employment will slow more than the employment.” “Our updated laboratory Less expectations require immediate action of STEM employment risks; For the Federal Reserve, we are preparing the timing of price resumes from September to December. “

He added that the bank sees three other discounts in serial prices after December, which would reduce the target scope of the standard federal funds rate to the limits of 3.25 % to 3.5 % by the second quarter of 2026.

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The report noticed that the changes are on Definitions on Chinese goods Reducing the average effective tariff rate from about 24 % to about 14 %, which is a noticeable reduction although it is still much higher than the 2.3 % effective tariff that prevailed in 2024.

A Tariff“With regard to previous assumptions, this can be considered a tax reduction of about 300 billion dollars,” Feli wrote.

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He added: “The retreat of this tax must provide some relief to spend on consumers, and in our modeling it is sufficient to direct growth expectations in the second half of one of the modest contraction to one of the modest growth.”