Is a U.S. Recession Coming? Prediction Markets Cross 50% Probability
Recession fears are mounting as President Donald Trump’s new tariff plan rattles markets. Prediction platforms now price in more than a 50% chance of a U.S. recession this year, reflecting growing anxiety about the potential economic fallout.
Recession Risks Heightened by Tariff Strategy
On Polymarket, the leading decentralized prediction platform, the probability of a U.S. recession in 2025 surged above 50% for the first time since the platform launched its recession contract earlier this year. Within 24 hours of the tariff announcement, Polymarket’s “US Recession in 2025” contract jumped from 39 cents to over 50 cents, before pulling back to 46 cents. Similarly, on Kalshi, a regulated U.S. prediction market, recession odds rose to 54%, up from 40%.
Polymarket 2025 recession contract (Source: Polymarket)
The heightened Recession concerns stem from the sweeping tariffs unveiled by the Trump administration, which impose a base rate of 10% on all imports, with significantly higher rates targeting specific countries. China faces the steepest penalties, with an additional 34% levy on top of an existing 20% tariff, taking the total to 54%. These tariffs are set to take effect in early April.
Also read: Trump Promises ‘Make America Wealthy Again’ — Will Tariffs & Tax Cuts Backfire?
Traders and analysts worry that the tariffs will increase domestic inflation and trigger retaliatory measures from other major economies like China and the European Union, potentially igniting a global trade war. Such conditions could weigh heavily on the U.S. economy and global markets.
However, some economists remain cautiously optimistic. UBS, for instance, projects that while growth may slow, the U.S. economy could still expand by approximately 2% this year, aligning with its historical trend rate. They believe that the tariff impact may lead to an economic slowdown rather than a full-blown recession.
Also read: Polymarket Founder Sets the Record Straight: “Polymarket Is Not Focused on Politics”
Additionally, some market observers argue that the initial risk-off reaction to the tariffs may be short-lived. Joseph Wang, founder of the research platform fedguy.com, noted that tariffs, while inflationary, could prompt the Federal Reserve to cut interest rates. Lower rates may ultimately boost market sentiment and support economic growth.
Also read: America’s Financial Future: Can Potential Trump Tariffs and Bitcoin Have a Positive Impact?
Impact on Bitcoin and Risk Assets
The prospect of a U.S. recession and global trade tensions has also affected risk assets like Bitcoin. Following the tariff announcement, Bitcoin dropped 1.5% over 24 hours to $83,100. Wall Street also reflected heightened risk aversion, with S&P 500 futures down 3% at the time of writing.
Despite the downturn, some crypto traders remain hopeful that anticipated Federal Reserve rate cuts could support Bitcoin and other digital assets, similar to past easing cycles. Markets are now closely watching the Fed’s next moves, which could shape the outlook for both traditional and digital assets amid growing economic uncertainty.
