Key Takeaways
- Goldman Sachs analysts cut their projections for GDP growth, and said a recession could be more likely because of the Trump administration’s tariffs.
- They now put a 45% chance on a recession in the next 12 months, with its likelihood set to rise if most or all of the tariffs stay in place.
- The analysts said they have seen financial conditions worsen, foreign consumers boycott American goods, and a “spike in policy uncertainty.”
Goldman Sachs analysts told clients Sunday they are cutting their forecast for gross domestic product (GDP) growth in 2025, and raising their recession risk forecast in response to the Trump administration’s new tariffs.
The analysts now put a 45% chance on a recession coming in the next year, up from 35% previously, due to a “sharp tightening in financial conditions, foreign consumer boycotts, and a continued spike in policy uncertainty that is likely to depress capital spending by more than we had previously assumed.”
However, that 45% is predicated on the effective tariff rate rising by 15 points, less than it’s currently expected to rise if the Trump administration’s tariffs announced last week go into effect on Wednesday. If most or all of those tariffs are enacted and the effective tariff rate rises by roughly 20 points, the analysts said the likelihood of a recession could rise above 50%.
The Goldman analysts lowered their GDP growth forecasts to 0.5% for the fourth quarter and 1.3% for 2025, down from 1% and 1.5%, respectively.
The analysts said they now expect the Federal Reserve to make three consecutive quarter-point rate cuts starting in June, a month earlier than they previously expected cuts to start. In a recession, they expect about 2 points in total cuts over the next year.
The major indexes were down sharply Monday morning, extending last week’s tariff-fueled selloff after the stock market had one of its worst weeks in years. (Read Investopedia’s live coverage of today’s market action here.)
UPDATE—April 7, 2025: This article has been updated since it was first published to reflect more recent share price values.