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Goldman Sachs has increased its estimate of the likelihood of a US recession within the next year to 45%, up from 35% the previous week. This adjustment follows President Trump’s announcement of new tariffs, which have significantly impacted the economy. Key factors influencing this forecast include tightened financial conditions, a drop in foreign tourism, and heightened policy uncertainty reminiscent of past trade conflicts.
Goldman Sachs predicts that President Trump's tariffs will raise US inflation and unemployment, with a recession probability now at 30%. The average US tariff rate is expected to increase by 15 percentage points, potentially reduced to 9 through negotiations. Economic growth is projected to stall, prompting anticipated rate cuts by the Federal Reserve and European Central Bank.
Goldman Sachs has revised its forecast, now predicting three Federal Reserve interest rate cuts in 2025 and raising the probability of a U.S. recession to 35%. This adjustment follows concerns over President Trump's tariffs, which are expected to pressure economic growth and have led to a decline in household and business confidence. The bank anticipates rate reductions in July, September, and November, citing increased risks from upcoming tariffs.
Goldman Sachs warns that President Trump's upcoming tariffs could lead to increased inflation and a higher risk of recession, raising its year-end core PCE inflation forecast to 3.5% and predicting a 35% chance of recession within the next year. The Dow Jones fell 716 points amid concerns over the economic impact of these tariffs, which may provoke retaliatory measures from trading partners.
Goldman Sachs warns that impending tariffs from the Trump administration could lead to higher inflation, increased unemployment, and stagnant economic growth. The firm predicts a potential rise in tariff rates by 15 percentage points, with a more moderate increase of about 9 percentage points expected due to exemptions. Inflation is projected to reach 3.5% by 2025, while economic growth may slow to an annualized rate of just 0.2% in Q1 and 1% for the year. Unemployment is anticipated to rise to 4.5%, and the likelihood of a recession in the next year has increased to 35%.
Goldman Sachs anticipates that President Trump's impending tariffs will significantly increase inflation and unemployment while stunting economic growth, raising recession risks to 35%. The firm projects inflation to reach 3.5% by 2025 and expects the Federal Reserve to implement three rate cuts this year. With a potential tariff increase of 15 percentage points, the economic outlook suggests a return to stagflation reminiscent of the late 1970s and early '80s.
Barclays has cut its 2025 S&P 500 price target to 5,900 from 6,600, citing tariffs and worsening economic data. The bank downgraded its outlook on Consumer Discretionary and Industrials sectors to Negative, while upgrading Financials to Positive due to potential deregulation. Concerns about a recession are rising, with JPMorgan estimating a 40% probability, as major companies report weak demand and consumer confidence falters.
Goldman Sachs' chief economist, Jan Hatzius, indicated that a potential interest rate cut by the Federal Reserve in June may be postponed. He shared insights on the Fed's actions, market reactions, and his economic outlook during an appearance on 'Closing Bell.'
China is taking measures to slow the depreciation of the yuan, which is under pressure from a strong dollar and US tariff threats. UBS's chief economist warns that while a weaker yuan could modestly boost exports, it may lead to competitive currency devaluations among China's rivals. The government is ramping up efforts to stabilize the currency amid concerns over capital outflows and financial instability, especially with potential tariffs from the incoming Trump administration threatening trade.
Uncertainty looms for macro forecasters and investors as a new administration signals significant policy shifts in tariffs, immigration, and government scope. Key concerns include the labor market outlook, inflation, and the implications of high stock valuations and market concentration, alongside the unpredictable impact of AI. Jan Hatzius and David Kostin from Goldman Sachs share their insights on navigating these challenges in the coming year.
Jan Hatzius
People
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