U.S. Recession Odds on Polymarket Drop to 22% as Trade Tensions Ease

Bets on a U.S. recession in 2025 have plummeted, with crypto prediction platform Polymarket reflecting odds of just 22% this week—the lowest since late February. Earlier fears were stoked by a grim GDPNow forecast from the Atlanta Fed, which projected a 1.5% contraction for Q1, though the actual decline settled at a milder 0.5%.

Market anxiety peaked in March when former President Donald TRUMP announced reciprocal tariffs, spooking investors already wary of economic slowdown risks. The Federal Reserve's decision to taper its balance sheet reduction further fueled concerns. By April, Wall Street heavyweights like Goldman Sachs and JPMorgan had sounded alarms, with Goldman assigning a 45% recession probability. Polymarket's odds surged to 66%, and another spike followed after ex-Treasury Secretary Janet Yellen warned of Trump's tariffs' potentially "tremendously adverse" effects.

Behind the scenes, however, U.S.-China negotiations gained traction. Markets coined the "TACO" (Trump Always Chicken Out) trade, referencing the president's pattern of announcing tariffs only to walk them back. Goldman Sachs later slashed its 12-month recession odds to 30%, citing easing financial conditions and receding trade threats.