Tariffs to have ‘greatest negative impact’ on U.S. economy, says JPMorgan survey

U.S. President Donald Trump speaks during a National Day of Prayer event in the Rose Garden of the White House on May 1. Photo by MANDEL NGAN/AFP via Getty Images

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Donald Trump’s tariffs pose the greatest risk to the United States economy, according to a JPMorgan Chase & Co. survey of investors.

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“Out of all of Trump’s policies or actions, 56 per cent believe trade wars will have the greatest negative impact on the U.S. economy,” the survey said.

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The survey, which gathered responses from nearly 500 global investors leading up to the spring meetings of the International Monetary Fund and World Bank, also said they harbour worries about some of Trump’s policy actions, though to a lesser extent.

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For example, 17 per cent said “the dismantling of international co-operation and multilateral institutions” posed a threat to the U.S. economy, while 13 per cent are worried about the effects of undercutting the U.S. Federal Reserve‘s independence.

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Tax cuts through increased debt and deficits were cited by nine per cent as potentially harmful, while five per cent pointed to reduced immigration and one per cent to federal workforce layoffs.

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Trump’s plans to reroute global trade have so far received a poor reception from stock markets, with indexes around the world tanking dramatically in the wake of his “Liberation Day” announcement of reciprocal tariffs ranging from a baseline of 10 per cent to 49 per cent for some countries.

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Since the announcement on April 2, the U.S. president has backtracked by offering a 90-day reprieve. Administration staffers suggest the government is in the process of working out trade deals with individual countries, though none have been announced.

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Over the long term, investors ranked deglobalization, debt sustainability and war as the biggest threats to the world economy at 34 per cent, 27 per cent and 21 per cent, respectively.

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Given the chaos caused by tariffs, calls have increased predicting the U.S. economy will fall into a recession this year.

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U.S. gross domestic product data for the first quarter showed growth contracting 0.3 per cent, though economists said the result was better than it looked as an avalanche of imports distorted the data.

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However, stagflation was a greater worry than recession for surveyed investors.

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Stagflation occurs when prices rise, but economic growth stalls; a recession occurs when an economy records two consecutive quarters of negative growth.

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“While only 20 per cent see the risk of a hard landing recession materializing, 61 per cent expect the U.S. to enter a stagflation period over the next 12 months,” the survey said.

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JPMorgan said there is a 60 per cent chance of a recession hitting the U.S., but analysts said their recession call was “mild” compared with previous downturns and they aren’t sure when it would occur.

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For the moment, the bullish outlook for markets to continue hitting new highs has waned.

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“There is strong consensus that the S&P 500 is highly unlikely to return to the high print of 6,144 achieved on Feb. 19,” the survey said, with almost 60 per cent of investors indicating they expect outflows from U.S. markets to continue.