Goldman Sachs Report: U.S. Economic Recession Risk Significantly Increased Due to Trade Policy Changes and Tariff Hikes
Goldman Sachs’ latest report indicates that the risk of a recession in the U.S. economy has significantly increased due to changes in trade policies and rising tariffs. The firm has raised its probability of a recession from 20% to 35%, and predicts that the Federal Reserve will implement three rate cuts within 2025 to address the economic slowdown.
(Background: Germany’s GDP has contracted for two consecutive years, leading scholars to suggest “cancelling national holidays” to boost the economy.)
(Supplementary Background: Warning! American consumers are tightening their belts, retail growth is being revised downward, and is the nightmare of economic recession truly unavoidable this time?)
Goldman Raises Tariff Expectations for 2025
In a research report released early today (31st), Goldman Sachs has significantly raised its expectations for U.S. tariffs in 2025, warning that trade tensions could have a substantial impact on economic growth, inflation, and employment.
Goldman anticipates that the average tariff rate in the U.S. will rise by 15 percentage points by 2025, notably higher than the previous estimate of 10 percentage points. This adjustment is primarily attributed to the expectation that Trump will announce a comprehensive “reciprocal tariff” policy on April 2, imposing a 15% tariff on all U.S. trade partners, which will further increase import costs and affect inflation.
Additionally, Goldman has revised its core PCE inflation forecast for the U.S. in 2025 to 3.5%, which is 0.5 percentage points higher than the previous estimate. As tariffs rise, increased import costs will exert upward pressure on prices.
Goldman also lowered its GDP growth forecast for the fourth quarter of 2025 to 1.0% and expects the unemployment rate to rise to 4.5% by the end of the year.
Recession Risk in the U.S. Increased to 35%
Goldman has simultaneously adjusted its forecast for a U.S. economic recession, raising the probability of a recession within the next 12 months from the previous 20% to 35%.
The report indicates that this adjustment reflects a decline in expectations for economic fundamentals, a sharp deterioration in consumer and business confidence, and statements from U.S. government officials emphasizing that they may tolerate short-term economic weakness to achieve long-term policy goals. Goldman noted:
The drag on future growth from economic sentiment and policy risks is more evident than in the past few years.
Federal Reserve Rate Cut Expectations: Possible Cuts Three Times This Year
As the economic outlook worsens, Goldman has also adjusted its predictions for the Federal Reserve. Previously, Goldman anticipated only one rate cut by the Fed in 2025, but now believes the Fed may cut rates in July, September, and November, maintaining the rate between 3.50% and 3.75%. This expectation of rate cuts is primarily based on the pressure tariffs are placing on economic growth and the risk of potentially rising unemployment.
Goldman’s economists stated:
As the economy slows, the Fed will undertake what is termed “insurance rate cuts” to mitigate the risk of economic downturn.
Although the Fed currently emphasizes that rising inflation expectations will not immediately alter monetary policy, Goldman believes that as the unemployment rate rises, the likelihood of rate cuts will increase.
