In a dire prediction, Goldman Sachs has heightened its U.S. recession forecast to a notable 35%, sparking concern across economic and political spectrums.
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This comes as the global trade war appears on the brink of a significant escalation, led largely by President Donald Trump’s bold tariff decisions.
The financial giant cites these tariffs as potential catalysts for economic downturn, stoking fears of possible fiscal mismanagement.
Goldman Sachs economists have adjusted their outlook, predicting the Federal Reserve will enact three interest rate cuts throughout 2025.
These reductions, anticipated in July, September, and November, indicate an attempt to stave off economic decline amid increasing tariff tensions.
The probability of recession is largely attributed to Trump’s aggressive 25% tariff policy on imported cars, designed ostensibly to elevate U.S. manufacturing but perceived by many as a threat to economic stability.
The risks associated with these tariffs, scheduled to increase further on April 2, have been grossly underestimated, claims Goldman’s economists.
They warn that these moves might necessitate a series of 2019-style “insurance” cuts to protect the economy.
“We continue to believe the risk from April 2 tariffs is greater than many market participants have previously assumed,” noted economists led by Jan Hatzius.
Goldman Sachs has raised its recession probability over the next 12 months to 35%, up from 20%.
This revision reflects deteriorating household and business confidence and a waning growth forecast for real GDP.
The prediction also sees inflation reaching 3.5% by the year’s end, heightening concerns about the impact of high inflation on markets and the potential rethink of interest rate cuts by the Fed.
“The downside risks to the economy from tariffs have increased the likelihood of a package of 2019-style ‘insurance’ cuts,” note the GS economists led by Jan Hatzius, cited by Yahoo Finance.
The unemployment outlook for 2025 has also worsened, with expectations reaching 4.5%, while GDP growth projections have been slashed to a dismal 1%.
Goldman Sachs further adjusted its stock market predictions, reducing the S&P 500 target by nearly 10% to 5,900.
The index suffered a 6.3% decline in March, marking its worst performance since September 2022.
Goldman Sachs raises U.S. recession risk to 35% amid trade tensions and weak confidencehttps://t.co/JPIZ4isUUi
— ForexLive (@ForexLive) March 31, 2025
President Trump continues to push his agenda, planning substantial import taxes across all countries despite prior reconciliatory gestures.
While aiming to stimulate local industry, these tariff measures could inadvertently lead the U.S. into recession, warn economists.
Such economic upheaval not only risks job losses but also challenges the free-market principles many value and have fought to protect.
