Prediction markets are signaling a sharp uptick in recession fears after President Donald Trump unveiled sweeping tariffs that threaten to derail global trade flows and dampen U.S. economic growth.
On decentralized betting platform Polymarket, odds of a U.S. recession in 2025 surged past 50% — the highest level since the contract went live in January. Meanwhile, on regulated market Kalshi, the likelihood of a recession jumped to 54% from 40% within hours of the announcement.
The spike in sentiment follows Wednesday’s announcement of a blanket 10% tariff on all imports, with elevated rates for key trading partners. China was hit hardest, facing a total 54% levy after an additional 34% was added to existing duties. India and the EU were also targeted.
Markets swiftly turned risk-off. U.S. equity futures fell sharply, with the S&P 500 down 3%, while safe-haven assets like gold rallied to new highs. Bitcoin dropped to $83,100, wiping out earlier gains amid growing economic uncertainty and broader market stress.
“The abrupt rise in recession odds reflects market concerns about retaliatory trade measures and the inflationary impact of tariffs,” said Monica Lee, a macro strategist at Horizon Markets. “Investors are bracing for a slowdown, especially if consumer prices rise and supply chains tighten.”
Despite the heightened risk, some analysts suggest the market reaction may be temporary — particularly if the Federal Reserve responds with rate cuts.
“Tariffs, while inflationary on the surface, tend to dampen demand and eventually lead to disinflationary pressures,” said Joseph Wang, a former Fed trader and analyst at FedGuy.com. “The Fed will likely step in to cushion the impact, and the market is already pricing in rate cuts starting in June.”
UBS echoed this view, maintaining a base-case forecast of 2% GDP growth for the U.S. in 2025, despite acknowledging the downside risks from trade tensions.
For crypto, the near-term outlook remains tied to macro conditions. Analysts are closely watching bitcoin’s behavior in risk-off environments — and whether recession fears will drive institutional rotation into digital assets, or keep pressure on speculative markets.
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