Bengaluru — Goldman Sachs raised the chance of a US recession to 35% from 20% and mentioned it anticipated extra fee cuts by the Federal Reserve, as President Donald Trump’s tariffs roil the worldwide economic system and upend monetary markets.
The brokerage additionally lowered the world’s largest economic system’s GDP development forecast for 2025 to 1.5% from 2% and projected three rate of interest cuts every from the US Fed and the European Central Financial institution from its earlier expectation of two every. Trump mentioned on Sunday his reciprocal tariffs, to be introduced this week, would come with all international locations and never a extra restricted quantity, rattling monetary markets globally over fears of an financial slowdown. In a separate notice, Goldman additionally minimize its year-end goal for the S&P 500 index for a second time this month to five,700 from 6,200, the bottom amongst Wall Road brokerages, adopted by Barclays’s goal at 5,900.
Goldman expects the common US tariff fee to rise 15 proportion factors in 2025, 5 proportion factors greater than its prior baseline forecast and predicts Trump to announce reciprocal tariffs that common 15% throughout all US buying and selling companions on April 2.
“Virtually the whole [tariff rate] revision displays a extra aggressive assumption for ‘reciprocal’ tariffs,” Goldman wrote in a notice on Sunday.
The brokerage estimates the Fed to consecutively minimize rates of interest in July, September and November, in contrast with its earlier forecast of two cuts in June and December.
Europe is anticipated to fare worse than the US, Goldman warned, because it projected the area’s economic system might enter right into a “technical” recession this yr.
The brokerage forecasts “little” development for the remainder of 2025, with nonannualised development of 0.1%, 0% and 0.2% within the second, third and fourth quarter, respectively.
The brokerage expects Trump to implement a reciprocal tariff on the EU amounting to fifteen proportion factors, elevating the overall efficient tariff fee by 20 proportion factors.
“We estimate that our new tariff assumptions will decrease euro space actual GDP by a further 0.25% in contrast with our earlier baseline, for a complete hit to the extent of GDP of 0.7% in contrast with a no-tariff counterfactual by end-2026,” Goldman mentioned in a separate notice on Sunday.
Nonetheless, in a extra “draw back” situation of tariffs, Goldman sees a complete hit of 1.2% to the economic system which might push the euro space right into a technical recession in 2025, in contrast with a no-tariff situation. The brokerage mentioned it now anticipated the ECB to ship a further minimize in July, with its earlier forecast of a fee minimize every in April and June.
Reuters
