U.S. Recession Fears Ease as Trade Tensions Cool, Polymarket Odds Drop to 22%

Bets on a U.S. recession in 2025 have plummeted to 22% on crypto prediction platform Polymarket, marking the lowest level since late February. The shift reflects cooling trade tensions and improved economic indicators after months of uncertainty.

Earlier this year, recession fears spiked when the Atlanta Fed's GDPNow tracker projected a 1.5% Q1 contraction, though the actual decline was milder at 0.5%. Markets faced additional pressure in March as former President TRUMP announced retaliatory tariffs on what he termed 'Liberation Day,' coinciding with the Fed's decision to slow balance sheet reduction.

By April, Wall Street institutions sounded alarms—Goldman Sachs placed recession odds at 45%, while Polymarket contracts surged to 66%. The anxiety peaked in May when former Treasury Secretary Janet Yellen warned Trump's tariffs could deliver 'tremendously adverse' economic effects.

Behind the scenes, however, U.S.-China negotiations gained traction. Traders coined the 'TACO' (Trump Always Chicken Out) narrative, observing a pattern of tariff threats followed by reversals. Goldman Sachs has since revised its 12-month recession probability down to 30%, citing easing financial conditions and receding trade risks.