Goldman Sachs Raises U.S. Economic Recession Probability and Tariff Rate Expectation

March 31st. In the early morning of today, Goldman Sachs significantly enhanced its expectations for U.S. tariffs in 2025 in a research report and cautioned that the escalation of trade tensions could have a serious impact on economic growth, inflation, and employment. The bank currently anticipates that the average U.S. tariff rate in 2025 will increase by 15 percentage points, which is higher than the previous baseline of 10 percentage points. The main reason for this adjustment is that the expected comprehensive "reciprocal tariffs" to be announced by Trump on April 2nd will impose an average 15% tariff on all U.S. trading partners, and the average actual impact of tariffs is expected to increase by 9 percentage points. Goldman Sachs has raised its core PCE inflation expectation for the end of 2025 in the U.S. by 0.5 percentage points to 3.5%, citing the influence of rising import costs on inflation. The GDP growth rate in the fourth quarter is expected to slow down to 1.0%, which is 0.5 percentage points lower than the previous expectations, and the unemployment rate is expected to rise to 4.5% by the end of the year. Goldman Sachs has increased the probability of an economic recession in the U.S. in the next 12 months to 35%, citing weak consumer and business sentiment, and indications that policymakers may be more inclined to accept the recent economic pain in order to pursue broader policy goals. With real income growth already decelerating, the economy may be entering a more fragile stage where sentiment and policy risks have a greater drag on the economy than in recent years. (Jinshi)