Official White House photo by Shealah Craighead
Goldman Sachs Raises U.S. Recession Risk to 45% Amid Trade War Concerns
Goldman Sachs has elevated its forecast for the likelihood of a U.S. recession within the next 12 months to 45%, up from the previous estimate of 35%. This adjustment comes amid growing concerns over President Donald Trump’s proposed tariffs and their potential disruptive effects on the global economy.
Impact of Proposed Tariffs
The Trump administration’s announcement of significant tariffs on imports from various countries has raised alarms among economists and financial institutions. Goldman Sachs analysts attribute the increased recession probability to several factors:
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Financial Market Volatility: The introduction of tariffs has led to heightened financial market volatility, contributing to a tightening of financial conditions.
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Consumer and Business Uncertainty: The threat of retaliatory measures and the unpredictability of trade policies have dampened consumer and business confidence, potentially leading to reduced spending and investment.
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Global Trade Tensions: Escalating trade tensions could result in foreign consumer boycotts of U.S. goods, further straining the economy.
Revised Economic Projections
In light of these developments, Goldman Sachs has revised its U.S. economic growth outlook for 2025, lowering the forecast to 1.3% from the previous estimate of 1.5%. The firm also anticipates that the Federal Reserve may initiate interest rate cuts starting in June, with expectations of three consecutive 25 basis point reductions.
Broader Industry Concerns
Goldman Sachs is not alone in expressing concerns. J.P. Morgan has raised its recession probability to 60%, highlighting fears that the tariffs could ignite inflation and provoke retaliatory actions from trade partners, notably China.
As the situation develops, markets and policymakers worldwide are closely monitoring the potential economic impacts of these trade policies.
