Goldman Sachs just made a dramatically pessimistic shift in its predictions for the U.S. economy and stock market this year in light of President Donald Trump’s tariffs, joining a growing chorus of economists warning the trade war could tilt the U.S. into a recession—and that there’s further pain ahead for equity investors.
President Donald Trump could be the author of a recession, some economists warn.
Goldman Sachs economists led by Ronnie Walker upped their forecasts for the average tariff rate to rise to 15% on all goods this year in a Sunday note to clients, reflecting Trump’s latest posturing ahead of his Wednesday tariff “Liberation Day” as the president said he’s aiming for even heavier levies than previously expected.
That translated into far more bearish economic forecasts for Goldman, which hiked its probability for a recession over the next year from 20% to 35%.
The economists raised their end-of-2025 inflation forecast to 3.5% (up from 2.8% last month) their unemployment prediction to 4.5% (highest since October 2021) and its gross domestic product growth forecast to 1% (worst since 2020).
Goldman strategists accordingly slashed their expectations for stock market returns, as the David Kostin-led group wrote to clients it expects the S&P 500 benchmark to decline 5% over the next three months, setting a 5,300 price target, and for the index to rise 6% over the next year, setting a 5,900 target.
Goldman had a 6,500 year-ahead target for the S&P as recently as Feb. 28, cutting its forecast by nearly 10% in March.
6.3%. That’s how much the S&P was down in March through Friday’s close, trending to its worst month since September 2022. That does not even factor in the index’s more than 1% drop in premarket trading Monday.
Trump said Sunday he plans to target “all countries” with “substantial” import taxes on his reciprocal tariffs expected to be announced Wednesday, reversing his assertions last week his upcoming tariffs would be “more lenient.” Trump and his top economic official, Treasury Secretary Scott Bessent, have both said they won’t rule out a recession, casting the prospect of a downturn as the result of unsustainable economic growth tied to high government spending and slanted trade. But some economists have expressed the Trump administration may needlessly tip the U.S. into a recession. UCLA Anderson School of Management economist Clement Bohr warned Trump earlier this month: “If all your wishes come true, you could very well be the author of a deep recession.” The prospect of higher inflation tied to tariffs is particularly concerning for financial markets, as sticky high prices may cause the Federal Reserve to rethink further interest rate cuts, which would make borrowing costs pricier, weighing on corporate profit margins and consumer demand.