Concerns about a potential U.S. recession are growing in light of President Donald Trump’s tariff strategy, with prediction platforms Polymarket and Kalshi reflecting an increase in worries that the economy might suffer.
On Polymarket, a decentralized prediction marketplace, the likelihood of the nation experiencing a recession this year surpassed 50% for the first time since trading began on the “US Recession in 2025” betting contract earlier this year. The contract’s Yes shares jumped to over 50 cents from 39 cents in under 24 hours.
This contract will conclude with a Yes if the National Bureau of Economic Research (NBER) confirms a recession at any point before December 31. Additionally, a second criterion involves consecutive quarterly contractions in gross domestic product.
Kalshi, a regulated prediction market based in the U.S., also highlights rising economic anxieties among traders, with the probability of a recession in 2025 climbing to 54% from 40%.
Financial markets typically anticipate future conditions and may react to increasing odds of a U.S. recession by driving down risk assets, including bitcoin (BTC) and other cryptocurrencies. At the time of publication, S&P 500 futures traded 3% lower, indicating severe risk aversion on Wall Street and providing bearish signals for bitcoin, which traded at $83,100, marking a 1.5% decrease over 24 hours.
The extensive tariffs announced on Wednesday establish a baseline rate of 10% on all imports, alongside elevated taxes on 60 nations identified as significant offenders. China, being the most affected, faces a 34% tariff in addition to the existing 20% charge, raising the total to 54%. The base tariffs will take effect on April 5, followed by the higher reciprocal rates on April 9.
Although the Trump administration anticipates that the tariffs will address the substantial and ongoing U.S. goods trade deficits, in the short term, they could contribute to domestic inflation and global uncertainty. The latter scenario could emerge quickly if China, the European Union, and other nations respond with their own elevated tariffs, potentially igniting a full-scale global trade conflict.
Is the Risk-Off Climate Temporary?
Nonetheless, some analysts suggest that the uncertainty surrounding tariffs might result in an economic slowdown rather than a severe recession.
“While the potential for further tariff escalation is a significant concern, our economic predictions do not project a recession in the U.S.,” UBS stated in a blog entry. “In our base scenario, a variety of selective tariffs and retaliatory measures are expected to lead to slower economic growth compared to last year, but should not hinder the U.S. economy from expanding by around 2%—its historical growth rate—this year.”
Regarding financial markets, some analysts believe that the tariffs are dovish, suggesting that the initial risk-off reaction could be brief and quickly reversed by the anticipation of interest rate cuts by the Federal Reserve.
“Keep in mind that tariffs are dovish, and substantial tariffs are particularly dovish,” remarked Joseph Wang, operator of the research platform fedguy.com, referencing his November post that detailed how significant tariffs could lead to increased rate cuts.
Wang contended that while tariffs may provoke inflation, this effect can be alleviated through foreign-exchange rates and are ultimately temporary. In the meantime, damage to business sentiment can have lasting effects, potentially leading to unemployment, something the Fed would seek to prevent.
Rates traders are already factoring in a higher likelihood that the Fed will cut the benchmark borrowing rate in June, reigniting the easing cycle that commenced in September of last year.
