As he welcomed race car drivers and owners to the White House, President Donald Trump talked about his tariff pause.
Key Takeaways
- Goldman Sachs forecasters lowered their odds of a recession in 2014 to 45%. This was a reduction from 65% earlier that day.
- The economists pulled back on their recession predictions after President Donald Trump paused some of the "Liberation Day" tariffs he announced last week.
- Trump's frequent changes to trade policy have sent financial markets on a roller coaster ride and stoked uncertainty among business leaders about trade policy.
Goldman Sachs economists revised their recession forecast after President Donald Trump announced that tariffs would be suspended for 90 days. The tariffs had threatened to destabilize an economy.
The investment bank’s economists sent out a memo Wednesday afternoon predicting a 45% probability of a recession in the next year. They retracted a call that they made just over an hr earlier, when they increased the probability of a recession to 65%.
The forecasting team retracted their recession predictions when Trump paused the “reciprocal tariffs” against trading partners which had been in effect for hours.
The abrupt change in policy highlighted the difficulty of predicting economic trends amid Trump’s frequent trade policy changes. Economists have highlighted uncertainty about trade policy as a major risk to the economy since businesses may delay investment and hiring decisions until they have a better idea of what rules will apply long term.
Goldman’s 45% probability of a recession remains elevated compared to a few short months ago. When Trump was elected, Goldman predicted only a 15% chance for a recession. The economy seemed to be headed towards a “soft-landing” with a resilient job market and declining inflation. Forecasters have said that Trump’s protectionist trading policies and the uncertainty around them have increased the risk of a recession, a slowdown in economic growth and high job losses.
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Goldman Sachs. "USA: President Trump Announces 90 Day Pause; Reverting to Our Previous Non-Recession Baseline."
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