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Escalating US Recession Probability to 35% by Goldman Sachs Amid Widening Scope of Trump's Tariff Policies

Goldman Sachs raises the potential for a US recession to 35%, as Donald Trump announces intended reciprocal tariffs on April 2. These actions may negatively affect both conventional markets and digital currencies.

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Financial institution Goldman Sachs increases the likelihood of a U.S. recession to 35%, coinciding...
Financial institution Goldman Sachs increases the likelihood of a U.S. recession to 35%, coinciding with President Trump's plan to impose hefty reciprocal tariffs on April 2. This move could cause turbulence not only in traditional markets but also in the cryptocurrency sector.

The Lowdown on Trump's Tariffs and Economy: The Goldman Sachs Perspective

Escalating US Recession Probability to 35% by Goldman Sachs Amid Widening Scope of Trump's Tariff Policies

Here's a no-nonsense breakdown of Goldman Sachs' latest analysis on the potential effects of President Trump's planned tariffs on the US economy.

Goldman Sachs' Alarm Bell: Recession Probability Hiked to 35%

Goldman Sachs has raised the US recession probability for the next 12 months to a staggering 35%, a significant increase from the previous 20%. The bank is concerned about Trump's trade policies and their potential consequences, including slower growth, increased inflation, and higher unemployment.

The Bank's Warning Notice: Tariffs Galore in 2025

According to Goldman Sachs economists, the average US tariff rate is expected to surge by 15 percentage points in 2025, primarily driven by more aggressive "reciprocal" tariffs Trump is planning to announce. The President is due to unveil these tariffs on April 2, which could average 15% on all US trading partners, though exclusions for certain countries and products will likely reduce the impact to a 9 percentage point increase.

The Economic Fallout: A Dour Forecast for 2025

As a result of these tariff changes, Goldman Sachs has predicted a grim outlook for the US economy in 2025. The bank has reduced its GDP growth forecast to a mere 1%, a 0.5 percentage point decrease from their earlier prediction. Additionally, the year-end core PCE inflation forecast has been raised to 3.5%, exceeding the Federal Reserve's 2% target, and unemployment projections have increased to 4.5%.

The Red Flags: Economic Downturn on the Horizon?

Key factors contributing to the mounting recession probability, according to Goldman Sachs, include a lower growth baseline, deteriorating household and business confidence, and willingness from the White House to accept near-term economic weakness. The erosion of consumer confidence is evident in the University of Michigan's consumer sentiment survey, which shows the highest percentage of Americans expecting unemployment to rise since the Great Recession.

An Economic Storm Approaching: Stagflation Risk Looms

The potential economic challenges could signal a "stagflation" risk, a combination of low growth and high inflation, reminiscent of the conditions experienced in the late 1970s and early 1980s. In response, the Federal Reserve is now expected to cut interest rates three times this year, a marked increase from the previous prediction of two cuts.

The Crypto Corner: Bitcoin Takes a Hit

Macroeconomic concerns have extended even to the crypto market. Bitcoin and other digital assets have seen a slight decline following Goldman Sachs' warning. Although cryptocurrencies were once thought to be unresponsive to traditional economic factors, they have become increasingly sensitive to broader macroeconomic conditions, particularly liquidity, risk sentiment, and real yields.

A Silver Lining in Economic Darkness?

While the economic outlook may be bleak in the short-term, some experts like Robbie Mitchnick, Global Head of Digital Assets at BlackRock, view a potential silver lining for Bitcoin during economic downturns. Recessions often lead to more fiscal spending, debt accumulation, and monetary stimulus, which can support Bitcoin prices over time, even in the face of short-term challenges.

  1. The surge in US tariff rates, as predicted by Goldman Sachs, might impact the cryptocurrency industry, with Bitcoin seeing a slight decline due to macroeconomic concerns.
  2. Goldman Sachs has increased the US recession probability to 35% for the next 12 months, raising concerns about slower growth, increased inflation, and higher unemployment.
  3. In response to potential economic challenges, the Federal Reserve is now expected to cut interest rates three times this year, an increase from the previously predicted two cuts.
  4. The potential economic problems could lead to a "stagflation" risk, a combination of low growth and high inflation, much like the conditions experienced in the late 1970s and early 1980s.
  5. The general news is filled with talk of Trump's tariffs and their potential impact on various industries, including finance, business, and politics, with the NSE (National Stock Exchange) potentially affected by these changes.

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