The bank attributes the rise in recession probability to three key factors: a lower growth baseline; deteriorating household and business confidence; and "statements from White House officials indicating greater willingness to tolerate near-term economic weakness.” Despite historically poor predictive power from sentiment measures, Goldman writes: "We are less dismissive of the recent decline because economic fundamentals are not as strong as in prior years.
Related Reading: Crypto Market Cap Evolution Shows Diverging Trends Among Top Digital Asset The impact on the macro outlook is stark: Goldman has downgraded its 2025 US GDP growth forecast by 0.5pp to 1.0% (Q4/Q4), lifted its year end core PCE inflation forecast to 3.5% (+0.5pp), and increased its unemployment projection to 4.5% (+0.3pp).
In the note titled "US Economics Analyst: A Further Increase in Our Tariff Assumptions”, Goldman economists Alec Phillips, Tim Walker, and David Mericle outline their rationale: "We now expect the average US tariff rate to rise 15pp in 2025 […] almost the entire revision reflects a more aggressive assumption for reciprocal’ tariffs.” Goldman anticipates that President Trump will announce across-the-board reciprocal tariffs averaging 15% on April 2.
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