Goldman Sachs analysts said on Sunday evening that they now expect an even greater chance of a U.S. recession in 2025, especially after President Donald Trump unveiled his agenda for reciprocal tariffs.

Goldman Sachs hiked its odds of a 2025 recession to 45% from 35% a week ago. The investment bank had last week also hiked its recession forecast.

Goldman Sachs said "a sharp tightening in financial conditions, foreign consumer boycotts, and a continued spike in policy uncertainty that is likely to depress capital spending by more than we had previously assumed" drove its heightened expectations for a recession.

The investment bank also warned that its current forecast assumed that many of Trump's tariffs, which will take effect on April 9, are not imposed.

If they do, Goldman Sachs expects to change its forecast to a U.S. recession by the fourth quarter.

The investment bank expects 2025 Q4 gross domestic product at 0.5%, lower than prior expectations.

Fears of a U.S. recession rose sharply in the past week after Trump unveiled his plans for reciprocal tariffs. Markets feared increased trade disruptions, depressed consumer spending and growing distrust of U.S. policy could drive a sharp downturn in economic growth over the coming months.

Trump's reciprocal tariffs were seen as far worse than markets were anticipating, with major economies such as China now facing a 54% cumulative tariff- a bulk of which is likely to be borne by U.S. importers.

Goldman Sachs sees three Fed rate cuts, starting in June
Goldman Sachs said heightened fears of a recession could see the Federal Reserve cut interest rates earlier and by a bigger margin.

The investment bank sees three consecutive 25 basis point "insurance cuts" starting in June, bringing U.S. rates to 3.5% to 3.75%.

But in a recession scenario, Goldman Sachs expects the Fed to cut by around 200 bps over the next year.

Source: Investing.com