By Carolina Mandl

NEW YORK (Reuters) - Traders across the globe project that tariffs and inflation will have the biggest impact on global markets in 2025 as they brace for volatility, an annual survey of institutional trading clients by JPMorgan Chase showed on Wednesday.

The bank said 51% of its 4,233 respondents named inflation and tariffs together as the top potential developments likely to dominate markets this year. Last year, inflation was also a top concern, but only for 27% of the interviewees.

U.S. President Donald Trump's threats to impose tariffs on foreign-imported goods and others aimed at specific sectors or countries already have whipsawed markets this year.

Major stock indexes fell on Monday after Trump announced on Saturday hefty new tariffs of 25% on imports from Mexico and Canada, and 10% on China. The following day, they rose after the president delayed tariffs on Mexico and Canada.

Many market participants see the tariff policy as inflationary.

“At the beginning of the week, we saw traders engaging in significantly more activity, attempting to rebalance their portfolios due to movements of 1 to 2 percent in individual currencies such as the Canadian dollar, the Mexican peso, and the offshore Chinese yuan,” said Chi Nzelu, global head of fixed income, currencies and commodities e-Trading at JPMorgan.

On the flip side, fewer traders believe that a potential recession could move markets this year: 7% versus 18% in 2024.

When asked about the biggest challenge in 2025, volatility was the topic most mentioned by the traders, repeating a 2024 concern. This year, 41% of respondents cited it as the top challenge, while 28% of the respondents mentioned it in the 2024 survey.

“What distinguishes this year is the somewhat unexpected timing of volatility. Unlike in the past, when volatility was tied to scheduled events like elections or nonfarm payroll data, we're seeing more sudden fluctuations in response to news headlines around the administration’s plans, leading to knee-jerk reactions in the marketplace,” said Eddie Wen, global head of digital markets at JPMorgan.

JPMorgan's e-Trading report also asked traders about their biggest concerns in terms of market structure, with access to liquidity, regulatory change and market data access and costs leading the pack.

Among the trends captured by the bank's survey is the increase of electronic trading, which traders predict will increase among all products traded next year, from emerging market rates to commodities and credit spread.

(Reporting by Carolina Mandl in New York; Editing by Mark Porter)