The risk of a recession in the U.S. is rising following President Trump’s April 2 announcement of sweeping new tariffs, according to Goldman Sachs.
In a research note on Monday, economists with the investment bank put the odds of the economy entering a recession within the next 12 months at at 45%, up from 35% in its previous forecast. Goldman cited tightening financial conditions, consumer boycotts of U.S. goods and uncertainty over the Trump administration’s economic policies, saying those factors are “likely to depress capital spending” by more than the bank had previously forecast.
“The combination of larger tariffs, greater policy uncertainty, declining business and consumer confidence, and messaging from the administration indicating greater willingness to tolerate near-term economic weakness in pursuit of its policies increase downside risk,” Goldman analysts said.
The bank lowered its forecast for economic growth in 2025 to 0.5%. In 2024, the nation’s gross domestic product was 2.8%.
“If most of the ‘reciprocal’ tariff goes into place on April 9, we expect to change our forecast to a recession,” Goldman analysts added.
Other economists have also warned that the 10% global tariff on all U.S. imports and “reciprocal” duties on roughly 90 countries unveiled on April 2 are likely to slam economic growth. Also Monday, TD Securities analysts said in a report that the “blunter than expected” tariffs last week raised the chances of a recession to 50%.
The global tariff took effect on Saturday, while the matching tariffs are set to hit on April 9.
To be sure, It is notoriously hard to predict a recession. But there are definitive criteria for an economic downturn to be defined as recessionary.
A recession is generally defined as a broad-based, persistent decline in economic activity, or more commonly two straight quarters of economic contraction. The National Bureau of Economic Research (NBER), a non-profit, nonpartisan research group that dates U.S. business cycles, is responsible for determining whether or not the economy has entered a recession.
To do so, the NBER evaluates six key indicators: real personal income; non-farm payroll employment; employment as measured by the household survey; personal consumption; manufacturing and trade sales; and industrial production.
Although policy uncertainty and waning consumer and investor confidence, among other factors, can make it feel like the economy is in a serious slump, such metrics on their own do not indicate that a recession has started.
Leading Wall Street figures are also expressing concern that Mr. Trump’s tariff agenda could lead to a reduction in economic growth.
In an annual letter to shareholders, JPMorgan Chase CEO Jamie Dimon on Monday highlighted the “many uncertainties surrounding the new tariff policy,” including potential retaliatory actions by foreign nations, that could put a damper on investment and growth.
“The recent tariffs will likely increase inflation and are causing many to consider a greater probability of a recession,” Mr. Dimon said in the letter.
Noted hedge fund manager Bill Ackman, CEO of Pershing Square, said in a social media post on Sunday that “by placing massive and disproportionate tariffs on our friends and our enemies alike and thereby launching a global economic war against the whole world at once, we are in the process of destroying confidence in our country as a trading partner, as a place to do business and as a market to invest capital.”
Ackman, an avowed supporter of President Trump, also said that the reciprocal tariffs slated to go into effect on Wednesday would amount to launching “economic nuclear war on every country in the world.”
Trump administration officials have vigorously defended their trade polices. Speaking on “Face the Nation with Margaret Brennan” on Sunday, Commerce Secretary Howard Lutnick said Mr. Trump “needs to reset global trade.”
“The factories that come build in America, we’re going to protect them. They’re going to be successful,” Lutnick added. “That’s why they’re going to build in America, the greatest economy in the earth. All of these companies are going to come and build here.”
U.S. Treasury Secretary Scott Bessent on Sunday dismissed the notion that tariffs would cause a U.S. recession. “I see no reason that we have to price in a recession,” he said on NBC’s Meet the Press.
Despite signs that growth is slowing, Federal Reserve Chair Jerome Powell said in a speech last week that “the economy is still in a good place.” He pointed to recent data showing resilient job growth, while noting that tariffs are likely to boost consumer prices.
