Betting markets are signaling growing fears of a U.S. recession in 2025, with odds surging after President Donald Trump announced sweeping new tariffs on global trading partners. By Thursday, the likelihood of a recession by 2025 surpassed 50% on Kalshi and hit 47% on Polymarket, marking historic highs on two of the world's most closely watched prediction platforms.
Why It Matters
On what the Trump administration dubbed "Liberation Day," the president unveiled a set of tariffs targeting nearly every major U.S. trade partner. A 10% baseline duty on all imports would be followed by sharper measures aimed at longtime allies and rivals alike. Within hours, markets recoiled, and prediction platforms began pricing in a grim new outlook.
What to Know
The sharp turn in prediction markets signaled more than just volatility—it marked a shift in sentiment, with many now viewing a recession as a coin flip rather than a distant risk. On Kalshi, the probability of a U.S. recession in 2025 jumped to 54%, up from 42.9% the day before. Polymarket mirrored the surge, leaping 14 points from 39% as Trump spoke to 53% before settling just below the halfway mark. More than $1 million in bets have been placed on the question.
Markets moved just as swiftly. The Nasdaq was down 5% midday Thursday. Apple, Nvidia, and Tesla—heavyweights with deep exposure to global trade—saw their shares tumble between 5% and 8%. The Dow Industrials were trading lower by 1,300 points, with the S&P 500 lower by 4%.
Traders work on the floor of the New York Stock Exchange (NYSE) moments after the Closing Bell and the start of President Donald Trump's news conference on tariffs on April 02, 2025 in New York... (Photo by Spencer Platt/Getty Images)
Europe took similar hits. Germany's DAX dropped 2.3%, while France's CAC fell 2.5%. The dollar lost nearly 2% against a basket of foreign currencies, prompting Deutsche Bank to warn clients of a "dollar confidence crisis." Analysts told Newsweek that the abrupt moves reflect growing concern that the tariffs could depress consumer spending, spike inflation, disrupt supply chains, and squeeze already fragile corporate margins—effects that may force the Federal Reserve to shift course.
What the Trump Administration Has Said
In a Truth Social post following the announcement, President Trump defended the move by comparing it to a surgical procedure. He called the policy a tool to build a "stronger and more resilient" economy. Treasury Secretary Scott Bessent, seen by experts and investors as the common-sense voice in the room, also defended the measure and warned U.S. trading partners against retaliation.
President Donald Trump holds up a chart while speaking during a “Make America Wealthy Again” trade announcement event in the Rose Garden at the White House on April 2, 2025 in Washington, DC. (Chip Somodevilla/Getty Images)
What Happens Next
With investors fleeing risk, gold surged to an all-time high of $3,167.50 per ounce as oil prices tumbled. Brent crude fell 5.8% to $70.61 per barrel on Wednesday, reflecting expectations of weaker global demand, while the broader market remained in sell-off mode ahead of the closing bell.
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