March 31 (UPI) — Investment bank Goldman Sachs has warned that U.S. President Donald Trump’s sweeping new tariffs may spike inflation and shrink the economy in coming months to the point of a recession.
On Sunday, the financial giant said it “continues to believe the risk from April 2 tariffs is greater than many market participants have previously assumed” and estimated a 35% chance of a Trump recession in the next 12 months, up from its previous outlook of 20%.
“The increase in our recession probability reflects our lower growth baseline, the sharp deterioration in household and business confidence in the outlook over the last month, and statements from White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of their policies,” Wall Street’s best-known investment bank wrote in a note to clients.
Goldman added that it sees a 0.3% rise in unemployment — up from the previous forecast — to 4.5% on the horizon.
Economists with Goldman say they raised their assumptions on tariffs for the second time in less than month, and hinted that its investors were underestimating the risks that higher import fees will have on the American economy.
The firm estimated the collective impact of Trump’s immigration, fiscal and tariff policies will subtract about 1.2% from gross domestic product growth over the next year.
“We note that President Trump recently said he expected his planned tariffs to raise the unusually specific figure of $600 billion to $1 trillion over the next year, implying an average effective tariff rate of 18% to 30% on current import volumes.”
All major stock indexes, meanwhile, have been at there lowest levels in months. U.S. stocks ended Friday with a major selloff amid fears of tariffs, inflation and declining consumer sentiment.
Meanwhile, Moody’s Analytics chief economist Mark Zandi recently hiked his own odds of an economic reversal to a 40% probability after a previous 15% estimate.
He warned the United States might see a “recession by design.”
