JPMorgan Chase (JPM) saw its stock plummet 5.17% in pre-market trading on Friday, as the banking sector faced renewed pressure following aggressive tariff hikes announced by President Donald Trump. The move comes as JPMorgan itself raised its recession probability forecast to 60%, citing concerns over the economic impact of the new tariffs.
In a note titled "there will be blood," JPMorgan's chief economist Bruce Kasman and his team warned that this year's 22-percentage tariff increase amounts to the largest tax hike since 1968. The bank's analysts stated, "The effect of this tax hike is likely to be magnified - through retaliation, a slide in U.S. business sentiment, and supply chain disruptions." They further cautioned that these policies, if sustained, could push the U.S. and possibly the global economy into recession this year.
The broader banking sector is also feeling the heat, with the KBW Nasdaq Bank Index having ended Thursday down 9.9%. Investors are weighing the gloomy economic outlook and the potential ramifications of Trump's far-reaching tariffs on banks' profitability. A resulting economic slowdown or recession could reduce demand for loans and increase delinquencies, directly impacting banks' bottom lines. Additionally, the uncertainty surrounding trade policy may lead to decreased merger and acquisition activity, further affecting banks' fee-based income.
Comments