UBS says U.S. likely to witness ’a meaningful recession’ without tariff relief

Published 05/04/2025, 10:56
© Reuters.

Investing.com -- Economists at UBS, the Swiss multinational investment bank, said yesterday that United States could enter ’a meaningful recession’, followed by more stock market losses if current tariff rates are not reduced within the next three to six months.

The bank warned that a failure to actively decrease tariffs could lead to a negative economic scenario. The S&P 500 plunged over 10% across two straight sessions to end the week.

"Uncertainty could be exacerbated if “maximum pressure” strategies extend into foreign policy (Iran and Ukraine-Russia) and fiscal policy (extension of U.S. tax cuts)," Solita Marcelli, Chief Investment Officer Americas at UBS Global Wealth Management, said in a note.

UBS’s base case for the next three to six months predicts that the effective tariff rate will gradually decrease due to increasing economic, political, and business pressures. However, this is expected to result in a period of slower U.S. and global growth, as well as prolonged market volatility.

The VIX index—widely known as Wall Street’s “fear gauge”— printed the second-highest level since pandemic on Friday after China imposed retaliatory tariffs on the U.S.

Earlier this week, UBS lowered its S&P 500 price target and downgraded U.S. equities to Neutral from Attractive. The bank also downgraded the U.S. technology sector.

Despite severe stock market losses, the White House issued a press release on Friday afternoon praising President Donald Trump’s economic policies. The release arrived shortly after U.S. markets closed deeply in the red, marking the first time the Dow Jones Industrial Average declined by 1,500 points on consecutive days.

The White House press release highlighted the Trump administration’s immigration initiatives, including a substantial decrease in illegal border crossings into the U.S. and a series of arrests of suspected gang members.

The administration also touted President Trump’s plan for reciprocal trade aimed at reversing the effects of decades of globalization, which, according to the press release, has negatively impacted the country’s industrial base.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.