The US economy faces a growing risk of a recession as surging tariffs threaten to stunt growth, reignite inflation and lift unemployment, according to Goldman Sachs. The Wall Street bank warned clients Sunday night that it now sees a 35% chance of a recession in the next 12 months, up from 20% previously. Goldman Sachs also increased its inflation estimate, slashed its 2025 GDP forecast to just 1% and bumped up its year-end unemployment rate outlook by 0.
3 percentage points to 4.5%. While Goldman Sachs still expects the US economy to avoid a downturn, other forecasters think it’s more of a 50/50 call.
This is Goldman’s highest recession probability since the regional banking crisis two years ago. The catalyst now is the shock from President Donald Trump’s trade war, which is set to intensify this week. Goldman Sachs blamed the “sharp recent deterioration in household and business confidence, and statements from White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of these policies,” the bank’s economists wrote in the report.
Consumer confidence has plunged in recent months. The University of Michigan’s consumer sentiment survey, released Friday, showed the highest percentage of Americans expecting unemployment to rise since the Great Recession as inflation expectations hit 32-year highs. “While sentiment has been a poor predictor over activity over the last few years, we are less dismissive of the recent decli.
