Following U.S. President Donald Trump's announcement to suspend reciprocal tariffs on select countries, Goldman Sachs swiftly withdrew its latest recession prediction. The bank had previously raised the probability of a U.S. economic downturn within the next 12 months to 65%, but shortly after the news broke, it revised the likelihood back down to 45%.
Before Trump's decision, Goldman Sachs' economics team projected a 1% contraction in U.S. GDP for 2025 and an unemployment rate rise to 5.7%. However, after Trump announced the tariff suspension at 1:18 pm New York time on the 9th, triggering a rally across the three major U.S. stock indices, Goldman Sachs issued an updated report at 2:10 pm, overturning its earlier recession forecast. The bank stated that while a 10% baseline tariff and potential 25% additional duties on specific industries remain, the overall economic impact aligns with prior expectations, prompting a return to its non-recession baseline scenario.
The latest report indicates that Goldman Sachs remains cautious about U.S. economic growth in 2025, projecting just a 0.5% GDP expansion. It also adjusted the likelihood of a recession within the next year to 45% and suggested that the Federal Reserve may begin cutting interest rates as early as June to counter economic weakness.
However, Citigroup economist Andrew Hollenhorst noted that the tariff suspension does not guarantee the U.S. economy will avoid a slowdown and rising inflation. Meanwhile, JPMorgan Chase chief economist Michael Feroli argued that the Fed might delay rate cuts until September, cautioning that while the tariff pause reduces recession risks, the threat of economic contraction has not been eliminated.
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