Goldman Sachs has revised its forecast, warning that the risk of a US recession is now at 35%, up from just 20%. The investment bank attributes the increase to the tax-like impact on real disposable income and consumer spending due to higher tariffs. This sentiment is echoed by other economists, including Mark Zandi, who sees the probability of a recession rising to 40%.
The bank’s revised estimate takes into account the sharp deterioration in household and business confidence over the past month. Additionally, White House officials have indicated a willingness to tolerate near-term economic weakness in pursuit of their policies.
Goldman expects three interest rate cuts this year, despite rising inflation, driven by concerns over the labor market and stalling growth. This move is expected to ease monetary policy, with the Fed pivoting from its focus on price stability to concerns over the labor market.
The Trump administration has defended its trade policies as a strategic tool to rebuild heavy industry. However, investors are increasingly concerned about the sustainability of US debt, which totals $28 trillion and needs refinancing this year. The looming threat of rising interest rates has sparked fears that Uncle Sam may struggle to find enough demand at affordable rates.
As recession concerns grow, Goldman Sachs is revising its forecast, cautioning that the economy’s trajectory is becoming increasingly uncertain.
Source: https://fortune.com/2025/03/31/goldman-sachs-economy-shrinking-trump-tariffs-recession