The risk of a U.S. recession is climbing, with Wall Street's top economists sounding alarms over growing economic uncertainty. jpmorgan chase and goldman sachs have both raised their recession forecasts, citing escalating trade tensions, policy instability, and potential shifts in Federal Reserve strategy.

JPMorgan Chase economists increased their recession probability estimate to 40%, up from 30% at the start of the year, warning that policy shifts could dampen business sentiment and global growth.

"We see a material risk that the U.S. falls into recession this year owing to extreme U.S. policies," wrote a team led by Bruce Kasman.

"As U.S. policies are starting to turn less business-friendly, the risk is that sentiment sours, leading to a sharper pullback in spending across all corners of the world. Even if a full-blown trade war is averted, the back-and-forth threats could still be sufficient to slow global growth."

JPMorgan also pointed to stock market volatility and unpredictable policy moves as key factors eroding business confidence.

Goldman Sachs also revised its recession odds, though less dramatically, raising its 12-month forecast to 20% from 15%. The investment bank believes that the risk stems primarily from potential tariff increases and trade policy uncertainty.

"We raised it by only a limited amount at this point because we see policy changes as the key risk, and the White House has the option to pull back if the downside risks begin to look more serious," Goldman Sachs economists wrote in a note to clients.

In other words, Goldman is betting that the administration will soften its stance if economic data worsens. However, the bank also cautioned that if tariffs remain in place despite economic deterioration, the likelihood of a downturn will increase.

"If the White House remained committed to its policies even in the face of much worse data," Goldman Sachs economists warned, "recession risk would rise further."

A major unknown in this scenario is how the Federal Reserve will respond. Former New York Fed Chief Bill Dudley warned that the combination of rising tariffs and slowing economic momentum could put the central bank in a difficult position.

Trump's tariff policies, Dudley explained, simultaneously raise prices while hurting economic growth—creating a scenario where the Fed may be unable to move rates in either direction.

"I wouldn't be surprised if the Fed is locked on hold for many, many months," Dudley said, dismissing speculation of an imminent rate cut. He added that while some market participants are eyeing a May rate cut, he believes it would be "way too soon."

Meanwhile, former Treasury Secretary Larry Summers added to the recession debate, arguing that risks are now nearing a tipping point.

"The chances of a recession are getting close to 50/50," Summers said, suggesting that persistent inflation concerns could further strain economic stability.