JPMorgan Chase & Co CEO Jamie Dimon cautioned investors that the turmoil caused by US President Donald Trump’s tariffs and a global trade war could slow growth in the world’s largest economy, spur inflation and potentially lead to lasting negative consequences.
In his annual letter to shareholders, published yesterday following a rout last week that wiped off trillions of dollars from global stock markets, Dimon expressed concerns about how the tariffs would impact the US’ long-term economic alliances.
“The economy is facing considerable turbulence (including geopolitics), with the potential positives of tax reform and deregulation and the potential negatives of tariffs and ‘trade wars,’ ongoing sticky inflation, high fiscal deficits and still rather high asset prices and volatility,” Dimon wrote.
Photo: Reuters
Dimon, 69, has run the largest US bank for 19 years and is one of the most prominent voices in corporate US.
“We are likely to see inflationary outcomes ... Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth,” he wrote.
JPMorgan’s economists raised the risk of a US and global recession this year to 60 percent from 40 percent after Trump unveiled the steepest trade barriers in more than 100 years on Wednesday last week.
Meanwhile, Goldman Sachs Group Inc has raised the odds of a US recession to 45 percent from 35 percent, the second time it has increased its forecast in a week.
Dimon noted the potential for retaliation by other countries and said tariffs could affect economic confidence, investments, capital flows, corporate profits and the US dollar.
“The quicker this issue is resolved, the better, because some of the negative effects increase cumulatively over time and would be hard to reverse,” he wrote.
Tariffs also raise questions about the direction of interest rates, Dimon said.
While rates have declined recently, because of the weaker US dollar, the prospect of slower growth and declining risk appetite could cause rates to rise, he said, referring to the stagflation of the 1970s.
Expectations for modest US growth, known as a soft landing, could also be derailed.
“We enter this time of uncertainty with high equity and debt prices, even after the recent decline ... Markets still seem to be pricing assets with the assumption that we will continue to have a fairly soft landing. I am not so sure,” he wrote.
His comments come after billionaire fund manager Bill Ackman, who endorsed Trump’s run for president, said the US leader was losing the confidence of business leaders and should pause his trade war.
“The president has an opportunity to call a 90-day time out” to resolve trade issues via negotiation, Ackman wrote on X.
“If, on the other hand ... we launch economic nuclear war on every country in the world, business investment will grind to a halt, consumers will close their wallets and pocket books, and we will severely damage our reputation with the rest of the world that will take years and potentially decades to rehabilitate,” he added.
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