JPMorgan issued a stark warning about growing economic risks on April 4, as Richard Madigan, chief investment officer of its private bank, outlined the potential consequences of escalating tariffs. In a note titled “High Anxiety: Market Implications of Tariffs,” Madigan described a dramatic shift in the market narrative, from optimism to fear, as trade tensions deepen. “Liberation to isolation,” he wrote, following China’s decision to impose a 34% counter tariff on all imported U.S. goods. He warned that the current policy path may drive the U.S. and global economies closer to recession.

The JPMorgan executive projected that tariffs, if left in place, could push inflation up by “+1-2%” and take a comparable toll on economic growth. He warned:

If the U.S. tariffs announced stick and we don’t see further tit-for-tat escalation, rising concern of slower growth and higher inflation may become something worse, a race to recession. Self-inflicted pain.

He advised investors to monitor 10-year bond yields closely, as a drop would suggest markets are increasingly pricing in recession risk. Madigan also flagged corporate earnings expectations as overly optimistic: “I expect the 10% earnings forecast this year will quickly ratchet lower. The same for next year.”

Madigan likened the U.S. trade stance to an overly aggressive opening in a negotiation: “We’re watching in real time a ‘101-class’ on negotiation. It begins with anchoring.” But when starting points are “absurdly high,” he cautioned, credibility suffers. “No one’s happy with the tariffs announced except the President,” Madigan wrote, suggesting the current approach risks alienating trading partners and dragging the global economy down.

On monetary policy, he pushed back against expectations for four Federal Reserve rate cuts, stating:

That strikes me unlikely. I’m anchoring on one, the second half of this year. If growth abruptly turns lower, perhaps two. Time will tell.

With consumer spending faltering and companies potentially scaling back hiring, the JPMorgan executive concluded: “Tail risk is higher, markets aren’t inexpensive, the outlook’s uncertain.”

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