Goldman Sachs reduces GDP estimate, raises risk of recession amid tariffs

Key Takeaways

• Goldman Sachs analysts cut their projections for GDP growth, and said a recession could be more likely because of the Trump administration's tariffs.
• They now place a 45% probability on a recession within the next 12 month, and its likelihood is set to increase if all or most of the tariffs remain in place.
• The analysts said they have seen financial conditions worsen, foreign consumers boycott American goods, and a "spike in policy uncertainty."

Goldman Sachs analysts said Sunday that in response the Trump administration’s new Tariffs, they will be reducing their forecast of GDP growth for 2025 and increasing their recession risk.

The analysts now put a 45% chance on a recession coming in the next year, up from 35% previously, due to a "sharp tightening in financial conditions, foreign consumer boycotts, and a continued spike in policy uncertainty that is likely to depress capital spending by more than we had previously assumed."

The 45% estimate is based on a 15-point increase in the effective tariff, which is less than the current expectation for the rate to rise when the Trump tariffs announced last Wednesday go into effect. If the tariffs go into effect and the effective tariff rate goes up by around 20 points, analysts say the probability of a global recession could be above 50%.

Goldman analysts have lowered their GDP forecasts for the fourth quarter to 0.5% and 1.3% respectively, down from 1.5% and 1%.

Analysts now expect three consecutive quarter-point cuts in rates to begin in June. This is a month earlier than what they had previously anticipated. In a downturn, they expect a total of 2 points over the course of the next year.

The major indices were down sharply in the morning of Monday, continuing last week’s tariff fueled selloff following one of the worst weeks for stocks in years. (Read Investopedia’s live coverage of today’s market action here.)

UPDATE—April 7, 2025: This article has been updated since it was first published to reflect more recent share price values.