US at more risk of recession from Trump's trade wars, says Goldman

31st Mar 2025 11:34

(Sharecast News) - Goldman Sachs has raised its forecast for the probability of a US recession from 20% to 35%, saying that the Trump administration is sacrificing weaker economic growth as it continues to step up protectionist trade measures.

Ahead of the 1 April deadline in which Donald Trump will impose a barrage of trade tariffs on a litany of foreign imports, Goldman lowered its 2025 GDP growth estimate to just 1.0% and raised its year-end annual core PCE inflation estimate to 3.5%.

It is estimated that the Trump administration's trade tariffs will average 15% across all of its trading partners, though exclusions and special agreements could lower certain duties.

The change "reflects our lower growth baseline, the sharp recent deterioration in household and business confidence, and statements from White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of their policies", the investment bank said.

"While sentiment has been a poor predictor of activity over the last few years, we are less dismissive of the recent decline because economic fundamentals are not as strong as in prior years."

As part of its new forecasts, Goldman also brought forward projections for interest-rate cuts - predicting not two but three cuts this year in July, September and November - as it hiked its estimate for the unemployment rate to hit 4.5% by the end of 2025.

"While the Fed leadership has downplayed the rise in inflation expectations so far, we think it does raise the bar for rate cuts and in particular puts greater emphasis on a potential increase in the unemployment rate as a justification for cuts."