U.S. Recession Probability Jumps 10% to 52% Amid New Trade Policy

The probability of a U.S. recession this year has surged by 10% overnight, reaching 52% on the decentralized prediction platform Polymarket. This significant increase, which occurred on April 3, represents the most substantial single-day rise in recession probability on the platform this year. At the beginning of March, the odds of a recession were at just 21%, indicating a more than 130% increase in just 30 days.

The sudden shift in market sentiment can be attributed to the recent announcement of a comprehensive new trade policy. This policy introduces a universal 10% tariff on all imports and imposes targeted "reciprocal" tariffs of up to 48% on goods from 60 countries. Notably, the policy eliminates exemptions for categories typically protected from such measures, including raw materials, medical supplies, and critical industrial inputs.

Economists have expressed growing concerns over the potential economic impact of these tariffs. The immediate effects include rising input costs, fragile supply chains, and declining consumer demand. In the near term, the tariffs are expected to introduce inflationary pressure through cost pass-through effects on goods such as electronics, automotive parts, and construction materials. With core inflation already elevated and interest rates remaining high, the added price shocks could suppress real disposable income and erode demand, particularly among lower-income demographics.

Supply chain vulnerabilities are also magnified under the new regime. Many of the targeted imports lack domestic production capacity, and rapid onshoring or nearshoring alternatives remain structurally out of reach in 2025. This misalignment has intensified investor skepticism over the policy’s feasibility and economic rationale.

Despite the administration’s framing around reindustrialization and strategic leverage, analysts have pointed out that the tariff figures used to justify the reciprocal framework appear inconsistent with World Trade Organization and World Bank data. This discrepancy has fueled questions about the credibility of the underlying assumptions, contributing to volatility in prediction markets like Polymarket. The surge in recession probability reflects the market's growing unease with the potential economic fallout from the new trade policy, highlighting the need for careful consideration and potential adjustments to mitigate the risks.