Wall Street Raises Risks for US Recession After Latest Tariffs

Brokerages HSBC, Deutsche Bank and BofA warned Thursday that the U.S. economy faces a higher risk of slipping into a recession this year if President Donald Trump's sweeping new levies remain in place.

Trump on Wednesday imposed a 10% baseline tariff on all imports to the U.S. and higher duties on dozens of other countries.

If the tariffs are sustained, "recession risks will likely rise materially," Deutsche Bank said in a note, while BofA noted the economy could be pushed to "the precipice of recession."

Both Deutsche Bank and BofA predicted tariffs could potentially shave 1-1.5 percentage points from U.S. economic growth this year.

The recession narrative will gain traction, HSBC said, but added some of this is already "priced in," limiting the extent of the potential downside.

"Our equity market implied recession probability indicator suggests equities are already pricing in (about) 40% chance of a recession by the end of the year," HSBC analysts wrote.

Meanwhile, Barclays flagged a "high risk" of the world's largest economy entering a recession. On a quarterly basis, the brokerage expects the U.S. economy to contract 0.1% by the end of 2025.

Still, Barclays reiterated its forecast of two 25 basis point rate cuts by the U.S. Federal Reserve this year, while BofA stuck to its stance of no rate cuts.

However, in a recessionary backdrop, BofA projected the U.S. central bank could likely cut rates by 200 basis points or more.