Beware a recession that could be triggered by a chain reaction of tariff risk, Wall Street exec says

• TD Cowen’s Jeffrey Solomon says the economy could enter a recession later this year.
• The Wall Street vet says tariffs could have consequences that slow the economy.
• He told CNBC this week that the slowdown was likely already here.

A Wall Street executive said this week that the US economy could tip into a recession as soon as the second half of this year thanks to the consequences of tariffs.

Jeffrey Solomon, the president of TD Cowen, is among a small but growing group of forecasters on Wall Street who say a downturn is on their radar for 2025, despite most economists’ predictions that the US will head for a soft landing.

Solomon said that’s partly because of tail risks looming over the economy, pointing to Trump’s latest round of tariffs on imports from Canada, China, and Mexico.

The three countries, which are the US’s top trading partners, have vowed to impose retaliatory tariffs. Canada announced a 25% tariff, while China levied 10% and 15% tariffs on various US goods.

Solomon told CNBC that a full-blown trade war would spark a chain reaction, affecting supply chains in the US and potentially striking enough fear in business leaders to hold off on dealmaking and new investments.

“I wouldn’t expect but I wouldn’t be surprised if we see a recession coming in the back half of the year just based on people slowing things down and waiting to see how it all plays out,” Solomon said, adding that he believed markets hadn’t fully priced in the effects of tariffs.

“People have to take a breather and say: ‘Wow, is this real? Is it not real? What’s going to happen with it? I can’t really afford to make any capital investments until I understand what the landscape looks like,'” he said. “And that’s kind of what’s happening.”

Signs of an economic slowdown are already beginning to appear. The Atlanta Fed’s GDPNow tracker indicates that GDP is expected to contract by 2.8% in the first quarter. That would represent the first contraction in the economy since 2022, when the US slipped into a brief technical recession.

Job gains have also been slowing, with the economy adding 143,000 payrolls in January, fewer than the expected 169,000. ADP said the private sector added just 77,000 jobs last month, way fewer than the 148,000 jobs economists were anticipating.

The trade war could worsen the growth picture. The Brookings Institution projected in early February that US GDP could decline by as much as 0.32 percentage points and employment could decline by as much as 0.25% if Canada and Mexico followed through with retaliatory tariffs.

Torsten Sløk, Apollo’s chief economist, argued in a note last week that recession risks were rising. He also predicted a bout of stagflation, an economic scenario that involves high inflation and low economic growth.

“It’s a stagflationary shock when you see inflation going up and growth slowing down,” he told Bloomberg. “And that just happens to be the backdrop for the conversation that we’re having in markets at the moment.”

Dhaval Joshi, a chief strategist at BCA Research, told Business Insider that he believed the US could slip into a “mini-stagflation” as soon as the second quarter of this year as economic growth slows.

“We’ve got inflation around 3% or above, so that’s already there. But the ‘stag’ bit — in other words, the growth slowdown — that is still to come,” he said, adding, “I think that could happen quite quickly.”