Goldman Sachs has released a report titled "Countdown to Recession," revising its US growth forecast and increasing the likelihood of a recession. The bank now predicts that US GDP growth for the fourth quarter of 2025 will be only 0.5%, down from previous estimates. Additionally, it has raised the probability of a recession over the next 12 months from 35% to 45%.
According to a Monday report in forexlive, this revision is driven by several factors, including a sharp tightening of financial conditions, consumer boycotts in foreign markets, and increased policy uncertainty, all of which are expected to negatively impact capital spending more than originally anticipated.
The Bank further explains that this forecast assumes a 15 percentage point increase in the effective US tariff rate. If tariffs scheduled to take effect on April 9 proceed as planned, and if additional sector-specific measures are implemented, the effective tariff rate could rise by 20 percentage points, possibly pushing the economy into a recession.
Goldman raised its estimate from 20% to 35% early last week on fears that US President Donald Trump's planned tariffs would roil the global economy. Days later, Trump announced steeper-than-expected duties, which have ignited a selloff in global markets, Reuters reported on Monday.
The Goldman Sachs note highlights concerns over the economic consequences of the Trump administration’s trade policies, with growing apprehension about how these policies will affect the economy and investment climate, especially heading into the second half of 2025. Goldman Sachs suggests that if the tariffs are implemented as expected, it may need to revise its forecast to reflect a recession.