New data from prediction markets like Polymarket and Kalshi indicate a shift in economic outlook for the United States. These platforms now predict a recession beginning in Q1 2025, a significant reversal from the positive growth trend seen since 2022. This change is driven by upcoming economic data that suggests contraction within the U.S., potentially foreshadowing an official recession. Notably, prediction markets had previously projected optimistic growth for the U.S. economy. On April 29, both platforms witnessed a dramatic decline in predicted Q1 US growth, plummeting from around 0.5% to -0.4%. Polymarket bettors now place the odds of a U.S. economic contraction in Q1 at roughly 70%, a stark contrast to their mostly favorable outlook just one day earlier. This shift in sentiment coincides with the election of Liberal Mark Carney as Canada’s prime minister, who has pledged a more aggressive stance against the U.S. in ongoing trade disputes. The coming U.S. Bureau of Economic Analysis report (expected April 30) will provide insights into these effects. These markets rely on user-based trading contracts linked to specific events, where prices fluctuate based on predicted outcomes. In 2024, these markets proved as accurate in predicting the outcome of the 2024 election and Trump’s party’s control over the U.S. House and Senate. Further complicating the economic outlook is President Donald Trump’s announcement of plans to implement extensive tariffs on U.S. imports. While not yet fully implemented, these tariffs have created uncertainty, impacting indicators like the Philadelphia Federal Reserve Manufacturing Index which has seen its steepest decline since 2020. This index reflects manufacturers preparing for potential price hikes stemming from the planned tariffs.