TLDR
- As Trump’s tariffs loom on the horizon, Goldman Sachs has adjusted its forecast for the US economic landscape, predicting a 35% chance of recession within the year.
- Projected to elevate by 15 percentage points, US tariffs in 2025 are expected to stoke inflationary pressures, according to Goldman Sachs.
- Anticipating increased tariffs, Goldman Sachs revises the US GDP growth forecast for 2025 down to 1% and sees inflation climbing to 3.5%, painting a grim economic picture.
- Expecting a significant shake-up in trade, Trump plans to implement reciprocal tariffs averaging 15% starting April 2, which is likely to stir economic waters.
- The shaky economic environment, influenced by tariff changes, is sending tremors through the crypto space, with Bitcoin currently hovering at $83,230.
Goldman Sachs has raised its alert level regarding US economic prospects as Trump's tariff strategies come into play, hiking the recession probability to 35% from a prior 20%, warning of sluggish growth and elevated inflation risks.
In a recently published analysis titled 'US Economics Analyst: A Further Increase in Our Tariff Assumptions,' Goldman Sachs economists detail their apprehensions over Trump’s tariff strategies, marking the second adjustment in their 2025 projections this month.
The bank is bracing for a significant elevation in US tariff rates by 15 percentage points by 2025, driven by aggressive reciprocal tariffs, according to their latest insights.
Goldman anticipates April 2 will introduce comprehensive reciprocal tariffs averaging 15% affecting US trade partners, with specific exemptions likely trimming the effective rise to about 9 percentage points.
These anticipated tariff modifications have compelled Goldman to downgrade its 2025 GDP growth forecast for the US to a mere 1%, slashing 0.5 percentage points from previous expectations.
Raising its recession odds from 20% to 35%, Goldman Sachs also signals a heightened risk landscape for the US economy. pic.twitter.com/LToFpq3BtA
— Peter Berezin (@PeterBerezinBCA) March 30, 2025
The bank's updated core PCE inflation forecast now aligns at 3.5% by year-end, half a percentage point above their earlier estimate, steering clear of the Federal Reserve's 2% aim.
Goldman Sachs adjusts its unemployment predictions upward to 4.5%, reflecting a 0.3 percentage point increase from their prior outlook.
Economic Warning Signs Flash Red
Three drivers underpin Goldman’s elevated recession probability: a lower growth baseline, diminishing business and consumer confidence, and White House signals of an increased tolerance for short-term economic volatility.
The latest from the University of Michigan indicates a downturn in consumer confidence, with more Americans now bracing for rising unemployment levels pronounced since the Great Recession.
The Wall Street Journal mentions that Trump pressures his advisors towards even stricter tariffs, potentially spiking US trading partner levies by 20% across the board.
White House trade and manufacturing advisor Peter Navarro, speaking with Fox News Sunday, posits that Trump's tariffs could generate up to $600 billion annually, regarded as a significant tax hike impacting American consumers.
To navigate these economic headwinds, Goldman now foresees the Federal Reserve downsizing interest rates three times during the year, a shift from their initial two-cut expectation.
Market experts hint at a 'stagflation' scenario, painting a picture of sluggish economic growth amidst high inflation, reminiscent of the economic dynamics in the late 70s and early 80s.
Cryptocurrencies haven't dodged the economic turbulence, with Bitcoin and peers dipping in reaction to broader fiscal anxieties flagged by Goldman Sachs.
The narrative has shifted for Bitcoin and digital currencies, traditionally seen as unaffected by conventional economics, now increasingly linked with global macro conditions, such as liquidity and risk sentiment.
Interestingly, some pundits posit that Bitcoin could find a silver lining amid economic slowdowns. Robbie Mitchnick of BlackRock suggests that fiscal responses to recessions might eventually bolster Bitcoin's long-term prospects.
Mitchnick pointed out how recessionary environments often result in heightened fiscal expenditure, rising debt, and monetary measures—all pivotal factors capable of driving Bitcoin's valuation upwards over time.
In the recent trading action, Bitcoin has managed to recover past the $83,000 mark, after an initial slip post-Goldman announcement, to sit at a price of $83,230.
