Goldman Sachs Reverses Recession Forecast After Trump's Tariff Pause

Goldman Sachs has reversed its recession forecast following President Donald Trump's announcement of a 90-day pause on most of the administration’s new tariffs. This decision has significantly calmed markets that were previously rattled by trade war fears. The pause, which extends through July 8 unless further extended, has been seen as a positive development for the economy, with Goldman Sachs rescinding its earlier recession alert.

Trump's announcement to authorize a 90-day pause in additional tariffs on a wide range of countries willing to negotiate with the U.S. has been met with relief by investors and economists alike. This move comes after Trump's tariffs had triggered strong retaliation from China, fueling recession fears and causing concern among economic analysts. The pause has been seen as a step towards easing trade tensions and potentially avoiding a global recession.

Goldman Sachs economists had previously issued a report titled “Countdown to Recession,” in which they slashed their 2025 GDP forecast to just 0.5% and raised the chance of a recession. However, following Trump's announcement, the firm quickly withdrew this recession forecast, indicating a shift in their economic outlook. The pause in tariffs has been seen as a positive development for the economy, with analysts suggesting that it could help to stabilize economic growth and reduce inflationary pressures.

Markets responded quickly to the news. Bitcoin surged past $82,000, and the Nasdaq approached a 10% gain, recovering from its worst multi-day performance since the 2008 financial crisis. The 10-year Treasury yield eased from 4.5% to 4.4%.

Trump, posting on Truth Social, said multiple countries had initiated talks over trade and currency, prompting the tariff pause and a temporary reduction of the reciprocal tariff rate to 10%. However, tariffs on Chinese imports were raised to 125%, effective immediately. This move highlights the complex nature of the ongoing trade negotiations and the potential for further adjustments in tariff policies.

Goldman Sachs now estimates a 45% chance of recession and expects core inflation to peak at 3.5%, according to its latest client note. The surprise move came after four days of intense market volatility and mounting fears of a global recession. Treasury Secretary Scott Bessent will now lead upcoming trade negotiations, a shift that Wall Street views positively due to his moderate stance.

The decision by Goldman Sachs to rescind its recession forecast underscores the impact that trade policies can have on economic outlook. The pause in tariffs has been seen as a positive development for the economy, with analysts suggesting that it could help to stabilize economic growth and reduce inflationary pressures. However, it remains to be seen whether this pause will be extended or whether further trade negotiations will be successful in resolving the ongoing trade tensions.