US recession alert: Goldman Sachs sees 45% chance amid Trump tariff turmoil

Investment banking major Goldman Sachs has increased the chances of a US recession to 45 per cent, increasing its forecast for the second time in a week. Earlier, Goldman Sachs had said that the US' chances of going into a recession is 35 per cent.

The hike in the US recession odds from Goldman Sachs comes amid a flurry of by investment banks agreeing that the same would happen due to an escalating trade war.

Last week, the investment banking firm had raised its prediction to 35 per cent from 20 per cent amid fears that the some new reciprocal tariffs imposed by Donald Trump will rile up the global economy. Days later, the US President confirmed those fears by announcing steeper-than-expected duties, which have ignited a selloff in global markets.

Economists led by Jan Hatzius raised the 12-month recession probability to 45 per cent from 35 per cent, according to a research note dated April 6.

The move comes amid “a sharp tightening in financial conditions, foreign consumer boycotts, and a continued spike in policy uncertainty that is likely to depress capital spending by more than we had previously assumed”, as per the economists.

If most of the April 9 tariffs do take effect, they said, then the effective tariff rate will rise by an estimated 20 points once those increases and likely sectoral tariffs take effect, even allowing for some country-specific agreements at a later date.

“If so, we expect to change our forecast to a recession,” they said.

Top investment banks flag recession worries

Since the global market selloff started last week, at least seven investment banks have increased their forecast of a recession risk.

JPMorgan has put the odds of a US and global recession at 60 per cent, on fears that the tariffs will not only result in a US inflation but also spark retaliatory measures from other countries. China has already announced a 34 per cent retaliatory tax on all US imports.

Morgan Stanley said in a note dated Sunday that while a recession in the U.S. is not in their base case, “it is increasingly a realistic bear case”.

US economy forecast lowered

Goldman Sachs on Sunday also lowered the US economic growth outlook for 2025 to 1.3 per cent from 1.5 per cent. The economists also lowered their 2025 Q4-to-Q4 GDP growth forecast to 0.5 per cent from 1 per cent.

The 2025 growth outlook made by Goldman is still higher than Wells Fargo Investment Institute's (WFII) 1 per cent. growth forecast. Meanwhile, JPMorgan expects a 0.3 per cent decrease on a quarterly basis.

(With agency inputs)