Evercore ISI still sees recession probability at 35%-40% after tariff relief

Evercore ISI’s Krishna Guha writes that despite the Trump trade pivot with a partial retreat on broad reciprocal tariffs, the firm still sees the probability of U.S. recession at 35%-40%. The firm’s framework sees a scenario in which tariffs peak around 25% and come down to 15%-17% per cent by Q1. Evercore also writes that while the re-direction of purchases from China to countries like Vietnam might shave a few tenths of Q4 core PCE inflation previously estimated at 3.5%, roughly 13% of U.S. imports that still come from China are products not easily sourced elsewhere, and the scope to substitute this year may be limited.