Goldman Sachs Raises U.S. Recession Odds to 35% Amid Trade Tensions

Goldman Sachs has revised its forecast, increasing the likelihood of a U.S. economic recession within the next 12 months to 35%, up from the previous estimate of 20%. This adjustment is driven by a more pessimistic outlook on U.S. economic growth and a significant decline in consumer and business confidence. The firm now projects that the U.S. economy will grow at a slower pace of 1.5% in 2025, down from the earlier projection of 2.0%. Additionally, Goldman Sachs anticipates that the Federal Reserve will lower interest rates more frequently than previously anticipated.

The revision in the recession probability comes amid escalating trade tensions, with the U.S. government implementing tariffs on imported automobiles, steel, and aluminum. These tariffs are expected to increase the average U.S. tariff rate by 15 percentage points this year, surpassing the earlier projection by 5 percentage points. The firm also predicts that the core personal consumption expenditures price index will rise by 3.5% year-over-year by the end of this year, significantly higher than the previous forecast of 2.8% and the Federal Reserve's target of 2%.

Goldman Sachs has also lowered its target for the S&P 500 index at the end of this year to 5,700 points, marking the second reduction in March. This downward adjustment underscores the firm's concerns about the economic impact of the tariffs and the potential for a slowdown in economic growth. The firm's analysis highlights the risks posed by the U.S. government's trade policies, which could lead to higher inflation and unemployment, further complicating the economic outlook.