The odds of a US recession occurring in 2025 have escalated due to the imposition of tariffs, as per Alec Kersman, managing director and head of Asia-Pacific at Pimco.
What Happened: Alec Kersman, speaking at CNBC’s CONVERGE event in Singapore on Wednesday, revealed that there is now a 35% chance of a US recession this year. This figure marks a considerable surge from the 15% probability Pimco projected in December 2024, primarily due to the impact of tariffs enforced by the US.
However, Kersman also pointed out that Pimco’s base case scenario is a growth of 1% to 1.5% in the U.S. economy, a significant drop from previous forecasts, but still an expansion.
On the other hand, Kamal Bhatia, president and CEO of Principal Asset Management, told CNBC that trade policies leading to increased domestic consumption could potentially boost the U.S. economy more than anticipated. Bhatia noted that trade wars could prompt countries to become more insular, fostering patriotism that translates into increased local spending.
Consumer spending, which constitutes approximately two-thirds of U.S. gross domestic product, could rise due to tariffs, potentially causing the country’s GDP to perform better than expected, Bhatia added.
Why It Matters: The 25% tariffs on steel and aluminum imports imposed by U.S. President Donald Trump have now taken effect, triggering a swift retaliation from the European Union. This move has impacted several countries, including Canada, Australia, and the EU. “We’ve had very muted geopolitics in investing for a long period of time, and clearly tariffs are changing that,” opined Bhatia.
While the tariffs have fueled a buying frenzy and sent Hot Rolled Coil (HRC) prices soaring 36% year-to-date, real demand hasn’t budged, according to JPMorgan analyst Bill Peterson. The looming economic uncertainty, coupled with demand stagnation and rising scrap costs, could prevent stocks from fully cashing in.
Image via Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Market News and Data brought to you by Benzinga APIs
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
