J.P. Morgan has reduced its 2025 US growth forecast by 2.6%, adjusting it from 1.9%. The adjustments stem from concerns over policy uncertainty, increased prices due to new US tariffs, a spending slowdown, and retaliatory tariffs affecting exports.
J.P. Morgan’s decision to lower its growth forecast for next year reflects several clear pressures weighing on the economy. The bank had initially expected the US to expand by 1.9%, but after reassessing the situation, that number now stands lower by 2.6%. The reasoning behind this adjustment is straightforward—there are concerns that government policies may create unpredictability, that higher tariffs could push costs up, and that consumers may begin to spend less. On top of that, other countries could respond with their own trade barriers, making it harder for US businesses to sell goods abroad.
Impact Of Tariffs
For those closely watching these factors, the impact of tariffs should not be overlooked. History has shown that when trade restrictions tighten, costs tend to rise, often putting pressure on companies to adjust prices. If businesses pass those expenses on to consumers, inflation could remain higher than expected, ultimately influencing decisions at the central bank. This could shape expectations for interest rates, liquidity, and risk sentiment going forward.
The revised projections from J.P. Morgan also point to shifts in consumer behaviour. A slowdown in spending would align with signs that Americans may soon curb their purchasing as borrowing stays expensive and household savings dwindle. If this trend continues, it may pressure corporate earnings, affecting how investors value different sectors.
Exports face another threat. If other nations retaliate against increased US tariffs with their own restrictions, global trade may slow. Firms that depend heavily on international markets could see weaker demand, which may trickle into lower revenue expectations. The timing of these developments matters, as businesses often adjust prices and hiring plans based on where they see demand heading.
Financial Market Volatility
All of this means that financial markets could see periods of heightened volatility as participants react to new economic data and policy shifts. The challenge now is gauging how policymakers may respond, particularly if growth weakens faster than expected. Recent history suggests that reactions to changing conditions can come swiftly, which makes monitoring both government decisions and central bank signals even more essential.
Given these adjustments, strategies must weigh changing economic conditions carefully. If inflation remains persistent and central bankers hesitate to cut rates, borrowing costs might stay elevated for longer. This scenario would influence valuations, leverage considerations, and risk exposure across different asset classes. Those who account for these factors are likely to be better positioned as new information shifts expectations once again.
