Goldman Sachs increases U.S. recession probability and tariff rate expectations

On March 31st, Goldman Sachs sharply raised its expectations for US tariffs in 2025 in a research report this morning, and warned that the escalation of trade tensions may seriously affect economic growth, inflation and employment. The bank currently expects the average US tariff rate to rise by 15 percentage points in 2025, up from the previous baseline of 10 percentage points. The main reason for the increase is that it is expected that the comprehensive "reciprocal tariffs" that Trump will announce on April 2 will impose an average of 15% tariffs on all US trading partners, and the average real impact of tariffs is expected to increase by 9 percentage points. Goldman Sachs raised its core PCE inflation forecast for the end of 2025 in the United States by 0.5 percentage points to 3.5%, citing the impact of rising import costs on inflation. GDP growth is expected to slow to 1.0% in the fourth quarter, down 0.5 percentage points from previous expectations, and the unemployment rate is expected to climb to 4.5% by the end of the year. Goldman Sachs raised the probability of a U.S. recession within 12 months to 35%, citing weak consumer and business sentiment and signs that policymakers may be more willing to accept near-term economic pain in pursuit of broader policy goals. With real income growth already decelerating, the economy may be entering a more fragile phase, with sentiment and policy risks weighing on the economy more than in recent years.