Goldman Sachs cuts recession risk after Trump pauses tariffs
Goldman Sachs drops recession likelihood after Trump delays tariffs
Goldman Sachs has reduced its recession probability from 65% to 45%, revising its outlook following President Donald Trump’s announcement of a 90-day pause on new tariffs.
This shift came after a dramatic reversal in tariff policies, with the bank reverting to its non-recession baseline forecast. Analysts said that the new tariff plan aligned more closely with Goldman’s initial predictions for Trump’s trade policy, prompting the update, reports Business Insider.
Last week, Goldman had raised its 12-month recession probability from 35% to 45%, based on the expectation that Trump would move forward with a new wave of tariffs. When these tariffs took effect early Wednesday, Goldman’s forecast jumped again to 65%, driven by concerns that the White House would not quickly roll back the measures.
However, the announcement of the tariff pause shifted the economic outlook, allowing Goldman to lower the recession probability back to 45%, with a forecast of modest GDP growth at 0.5%.
Markets React to Policy Shifts
The tariff reprieve also caused volatility in financial markets. Stocks had been in turmoil earlier in the day but staged a stunning reversal after Trump’s announcement. The Dow Jones Industrial Average surged by more than 2,700 points, and the Nasdaq Composite posted its largest gain since 2008, up 12%. The S&P 500 also jumped as much as 9%.
Despite the temporary relief, Trump’s tariff policies are still in flux. The White House has maintained a 10% across-the-board tariff, while escalating tariffs on China to 125%. This ongoing uncertainty continues to fuel market speculation and swing recession forecasts.
While Goldman Sachs has lowered its recession risk, the trade war remains a major factor shaping global economic forecasts. Analysts will continue to monitor developments in the tariff saga, particularly the impact of the remaining levies on U.S. and global growth.
Recently we wrote, that Tesla CEO Elon Musk has publicly and privately distanced himself from President Donald Trump’s escalating trade war with China, voicing concerns that the administration’s protectionist policies could backfire on American businesses, including his own.
