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3w ago

Goldman Sachs Raises US Recession Probability to 45% as Tariff Concerns Mount

The Trump administration's tariff policies and tightening financial conditions prompt revised forecasts, with the Federal Reserve expected to cut interest rates in response.

A man sits in a corner space at the global headquarters of Goldman Sachs investment banking firm at 200 West Street in New York City, U.S., January 11, 2023. REUTERS/Shannon Stapleton/File Photo
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Overview

  • Goldman Sachs has increased the likelihood of a US recession within the next 12 months to 45%, up from 35%, citing tariff-related economic pressures.
  • The effective US tariff rate could rise by 15 to 20 percentage points if April 9 tariff increases proceed, further straining economic conditions.
  • Goldman Sachs forecasts a sharp decline in capital spending due to tightening financial conditions, foreign consumer boycotts, and heightened policy uncertainty.
  • The Federal Reserve is expected to implement three consecutive 25-basis point rate cuts starting in June under a non-recession scenario, with more aggressive cuts likely in a recession scenario.
  • Goldman Sachs has revised its 2025 GDP growth forecast downward to 0.5% from 1%, reflecting increased economic risks tied to trade policy and financial instability.