It may have gotten lost in the noise (understandably so since everything will change once Trump reveals the full extent of his policies) but overnight Goldman's research desk published their 2025 year-ahead reports, including Markets, Macro, Global, Asia, Euro, China, and much more. Below we summarize some of the highlights (full reports available to pro subscribers).
Goldman's Big Picture summary
- US: Goldman expects the second Trump administration to bring higher China tariffs, much lower immigration, some fresh tax cuts, and regulatory easing. If so, the US economy should grow 2.5% in 2025, highest within DM (Goldman is higher than consensus). US core PCE inflation should slow to 2.4% by late 2025. This forecast would rise to around 3% with an across-the-board tariff of 10%. The bank still expects significant further rate cuts over the next year. The Fed is likely to cut to 3.25-3.5%, with sequential moves through Q1 and a slowdown thereafter.
- Europe: Goldman cut its Euro area GDP forecast to a below-consensus 0.8% reflecting ongoing structural headwinds and a hit from trade policy uncertainty. The bank expects core inflation to slow to 2% by late 2025 and is less concerned about upside risks even with a broader trade war; also expects sequential ECB cuts and have lowered the terminal forecast to 1.75% on the back of our growth downgrade.
- China: Here too Goldman cut its 2025 China GDP forecast to 4.5% because of higher US tariffs that are only partially offset by easier macro policies. The combination of tariffs and policy support will rotate China's growth towards domestic demand (ex-housing) in 2025. Goldman estimates that a 20pp increase in the average US tariff on Chinese goods (our baseline assumption) would reduce Chinese GDP by about 70bp.
