Global investment firm KKR has sharply downgraded its 2025 U.S. growth forecast following a surprise move by the Trump administration to impose sweeping new tariffs. The firm’s latest macro update warns that the U.S. economy could now face a mild recession as inflation rises and growth slows.
Tariff wave stuns markets
President Trump’s ‘Liberation Day’ tariff plan, announced on April 2, introduced a flat 10% tariff across all imports, with country-specific add-ons starting April 9. China faces a staggering 68% total tariff rate, prompting fears of retaliation and global supply chain disruptions.
KKR estimates the average U.S. tariff rate could climb to 25–30%, exceeding even the Smoot-Hawley levels of the 1930s. “This was far more aggressive than we or markets expected,” said Henry McVey, Head of Global Macro at KKR.
U.S. outlook slashed
KKR has slashed its U.S. GDP growth forecast for 2025 to just 0.5%, down from 2.1%. The firm also sees a slowdown in Europe and China, though their outlooks are cushioned by rising fiscal support.
The U.S. faces dual headwinds: the new tariffs could amount to a fiscal tightening of 2.5% of GDP, alongside cuts from the Department of Government Efficiency (DOGE). In contrast, Germany and China are ramping up stimulus.
A new economic era
KKR analysts argue the tariff regime marks a turning point in global economics. “We are moving from benign globalization to great power competition,” said McVey, echoing General David Petraeus’ comments on geopolitical shifts.
The firm suggests investors should focus on non-correlated assets, upfront yield, and collateral-based cash flows, while anticipating further volatility in public equities.
