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With “liberation day” fast approaching, Goldman Sachs says it now puts the chances of a recession in the next 12 months at 35%. And it has everything to do with tariffs.
President Donald Trump, who has already enacted tariffs on major trading partners as well as steel and aluminum products, plans to enact “reciprocal” tariffs on Wednesday. He acknowledged this weekend that the April 2 “reciprocal” tariffs would be on all countries, “rattling financial markets globally over fears of an economic slowdown,” Reuters reported.
Tariffs and trade policy were finance leaders’ biggest concern in the Richmond Fed’s most recent survey.
In a research note, Goldman Sachs researchers wrote they expect tariffs will increase by 15% on average.
Goldman Sachs previously put the likelihood of an economic downturn at 20%. Researchers wrote that a recession is now more likely because of “our lower growth baseline, the sharp recent deterioration in household and business confidence, and statements from White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of their policies.”
Pricing implications. According to the note, the tariffs “are likely to boost consumer prices.” Consequently, the bank is forecasting 3.5% annual inflation, up slightly from its last note. Goldman Sachs also expects annual GDP growth of 1%, down half a percentage point. It also expects unemployment to hit 4.5% by the end of the year.
Goldman Sachs previously predicted a single rate cut in 2026, but now expects “three consecutive cuts this year in July, September, and October.”