Goldman Sachs raises recession odds to 35% due to tariffs

In the United States, Goldman Sachs has significantly revised its economic forecasts, raising the probability of a recession within the next year to 35%, up from a previous estimate of 20%. This change comes as a result of President Donald Trump's aggressive tariff policies, which are anticipated to increase the average tariff rate on goods to 15%. The strategic shift led Goldman Sachs economists to express concern regarding household and business confidence levels, which are currently deteriorating due to the uncertainty created by the ongoing trade war and the potential economic ramifications. Alongside the tariff increases, which are reminiscent of historical protective measures like the Smoot-Hawley Act of 1930, economists warn that such aggressive moves could inadvertently push the U.S. economy toward recession. The trade war, fueled by Trump’s actions, has already triggered worries among economists and Wall Street investors about a weakening economic outlook. The UCLA Anderson School of Management, for example, forecasts substantial risks ahead, hinting that if the administration’s economic policies continue in their current form, a deep recession could manifest. Furthermore, upcoming measures such as the anticipated reciprocal tariffs and their effects on consumer spending and confidence have caused a ripple effect through various sectors. Mark Zandi, Moody's chief economist, emphasized that the likelihood of recession has increased substantially since the start of the year, with his estimates nearing 40%. The sensitivity of financial markets to these developments highlights a growing pessimism that could redefine investor strategies and the overall direction of the market. The overall sentiment reflects a concern for economic stability moving forward. As tariffs and trade wars escalate, various economic indicators suggest a slowdown that could impact growth, labor market trends, and potentially lead to broader economic fallout. Consequently, a cautious approach seems to be the prevalent strategy among investors and analysts alike as they navigate through a landscape marked by uncertainty and risk.