Goldman Sachs raises the probability of US economic recession and expectations for tariff rates

Goldman Sachs significantly raised its expectations for U.S. tariffs in 2025 in a research report released early today, warning that escalating trade tensions could severely impact economic growth, inflation and employment. The bank now expects the average U.S. tariff rate to rise by 15 percentage points in 2025, higher than the previous baseline of 10 percentage points. The main reason for the increase is that it is expected that Trump will announce on April 2nd a comprehensive "reciprocal tariff" which will impose an average tariff of 15% on all US trading partners; the average actual impact of tariffs is expected to increase by nine percentage points. Goldman Sachs has increased its forecast for core PCE inflation at the end of 2025 in the United States by half a percentage point to 3.5%, due to rising import costs affecting inflation. GDP growth rate for Q4 is expected to slow down to one percent, down half a percentage point from previous forecasts; unemployment rate is projected to climb up to four and a half percent by year-end. Goldman Sachs has raised the probability of an economic recession within twelve months in America up to thirty-five percent because consumer and business sentiment are weak and there are signs indicating policymakers may be more willing accept short-term economic pain while pursuing broader policy goals as real income growth has already slowed down; economy might be entering into a more vulnerable phase where sentiment and policy risks weigh heavier on economy than recent years.