Goldman Sachs claims US encountering escalating recession risk
(MENAFN) Goldman Sachs has raised concerns about an increasing risk of recession in the US, warning that President Donald Trump’s aggressive tariff strategy could dampen economic growth, drive inflation higher, and push up unemployment.
In an updated forecast on Sunday, the Wall Street bank increased the likelihood of a US recession in the next 12 months to 35%, up from its previous estimate of 20%. The warning comes ahead of Trump’s anticipated “Liberation Day” announcement on Wednesday, when he is expected to unveil sweeping country-specific tariffs affecting all major US trading partners.
The administration has already imposed duties on steel, aluminum, automobiles, and all imports from China. A new 25% tariff on imported cars is set to take effect the day after the announcement.
Goldman Sachs warned that these tariffs are likely to strain household budgets, with higher prices cutting into real income. The firm now projects inflation to reach 3.5% by the end of 2025, up from 2.8%, unemployment to rise to 4.5%—the highest since late 2021—and GDP growth to slow to just 1%, the weakest pace since the pandemic-hit year of 2020.
The bank also cautioned that Trump's trade policies could trigger retaliatory actions from key allies such as Canada, the EU, and China, sparking a global trade conflict. While Trump argues the tariffs are essential to counter what he calls decades of unfair trade practices against the US, economists say the fallout could be severe.
Goldman further noted that the European Union may be more adversely affected than the US, predicting a possible technical recession in the bloc. The new tariffs could reduce euro area GDP by an additional 0.25%, for a total economic drag of 0.7% compared to a no-tariff scenario by the end of 2026.
EU industries heavily reliant on US exports, such as German automakers and French luxury goods producers, are expected to suffer significant losses. In response, Brussels has vowed to deliver a “timely, robust, and calibrated” reaction to the trade measures.
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