JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon has warned that the recent reciprocal tariffs imposed by US President Donald Trump will possibly result in an inflation situation in the country.
In his annual letter to shareholders on Monday, Dimon said that the recent US tariffs may also cause people to give in to fears of an impending recession.
“The recent tariffs will likely increase inflation and are causing many to consider a greater probability of a recession,” he said.
Jamie Dimon also warned that the price valuations at markets still remain relatively high, which is another reason to be cautious.
“And even with the recent decline in market values, prices remain relatively high. These significant and somewhat unprecedented forces cause us to remain very cautious. There is much more detail on all of this in section three,” he said.
JPMorgan Chase CEO flags ‘turbulence’
The CEO also flagged that there has been an ongoing economic turbulence due to these factors.
“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,” he said.
Short-term effects of Trump tariffs
Continuing his letter to shareholders, Jamie Dimon said that there will be important short-term effects of the tariffs.
“As for the short-term, we are likely to see inflationary outcomes, not only on imported goods but on domestic prices, as input costs rise and demand increases on domestic products. How this plays out on different products will partially depend on their substitutability and price elasticity,” he said.
Dimon further noted that while recession remains a question, the tariffs would slow down growth.
“Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth.”
JPMorgan Chase CEO wants quick resolution
In the letter, Dimon called for a quick resolution to the issue.
“The quicker this issue is resolved, the better because some of the negative effects increase cumulatively over time and would be hard to reverse. In the short run, I see this as one large additional straw on the camel’s back,” he said.
He cited a list of lingering questions around the new policy, including potential retaliatory actions by other countries, the impact on investments and capital flows, and the possible effect on the US dollar.
Still, he hoped for a positive outcome for the US on the back of negotiaons.
“I am hoping that after negotiations, the long-term effect will have some positive benefits for the United States. My most serious concern is how this will affect America’s long-term economic alliances,” he said.
