The U.S. economy is facing heightened recession risks as rapidly escalating tariffs threaten to dampen growth, reignite inflation, and push up unemployment, Goldman Sachs warned on Sunday night.
The probability of a recession in the US is approaching 50%
4/3/2025
In a note to clients, the Wall Street firm raised its estimate of a recession in the next 12 months to 35%, up from its previous projection of 20%.
Goldman also cut its 2025 GDP forecast to just 1% and increased its year-end unemployment estimate by 0.3 percentage points to 4.5%. The bank also revised its inflation outlook higher, citing mounting pressure from tariffs and weakening sentiment.
While Goldman Sachs still anticipates the U.S. may narrowly avoid a downturn, some other forecasters see the odds as closer to a coin toss. This marks Goldman’s highest recession risk projection since the regional banking turmoil two years ago. The primary driver now: a jolt from President Donald Trump’s escalating trade war, which is expected to ratchet up further this week.
Goldman pointed to “a sharp recent deterioration in household and business confidence,” and noted that comments from White House officials suggest the administration is increasingly willing to accept near-term economic pain in pursuit of its trade agenda.
Consumer sentiment has taken a serious hit. The University of Michigan’s survey, released Friday, showed a surge in the number of Americans expecting rising unemployment—now at the highest level since the Great Recession. Inflation expectations, meanwhile, have climbed to their highest level in 32 years.
“While sentiment has not always been a reliable indicator of real economic activity in recent years, we are less inclined to dismiss the recent decline,” Goldman said, “especially given that today’s economic fundamentals are not as strong as in past cycles.”
On the campaign trail, Trump pledged to make aggressive use of tariffs—but many investors, executives, and economists have been surprised by how fully he's followed through on that promise.
Speaking aboard Air Force One on Sunday, Trump downplayed earlier reports from Bloomberg and The Wall Street Journal suggesting that his administration would only initially match tariffs dollar-for-dollar on a small group of countries—possibly the “Dirty 15,” those with the largest trade imbalances with the U.S., as Treasury Secretary Scott Bessent floated last week.
