Tariff Proposals and Economic Outlook: Goldman Sachs Reports Rising Recession Risks
As U.S. President Donald Trump prepares to announce a new wave of tariffs this week, economists express growing concern regarding the risk of recession. According to a report from Goldman Sachs, the likelihood of a recession within the next year has increased significantly from 20% to 35%.
Reasons for Increased Recession Risk
The analysts from Goldman Sachs attribute this heightened risk to several key factors:
- A lowered growth baseline for the U.S. economy.
- A marked decline in both household and business confidence.
- Recent statements from White House officials indicating a willingness to endure short-term economic setbacks for the sake of broader policy goals.
Upcoming Tariff Announcements
Trump has indicated that he will introduce reciprocal tariffs effective April 2, a date he has termed “Liberation Day.” His administration plans to impose these tariffs on all trading partners initially, a move that has already caused turmoil in global financial markets, with the S&P 500 index dropping over 1% as trading commenced on Monday.
Financial Impacts of Tariffs
Goldman Sachs projections suggest that the average tariffs will hover around 15%, although specific exclusions may lower this figure. The administration has already enacted sweeping tariffs on China and other traditional trade allies such as Mexico and Canada, along with global tariffs on aluminum and steel. New tariffs of 25% on foreign autos and auto parts are set to take effect on April 3.
Economic Perspectives on Tariffs
Economists commonly view tariffs as a burden that is often passed on to consumers. However, some argue that they can be a tool to support domestic industries. U.S. Representative Chris Deluzio (D-Penn.) articulated a nuanced perspective, noting that while Trump’s tariff strategy has been chaotic, total condemnation of tariffs is not warranted.
In a positive note, Shawn Fain, president of the United Auto Workers (UAW), indicated that the auto tariffs could benefit workers. He stated, “The UAW and the working class in general couldn’t care less about party politics; working people expect leaders to work together to deliver results.”
Broader Economic Effects
Goldman Sachs further warns of impending inflation and subdued GDP growth, raising its inflation forecast for 2025 to 3.5%, surpassing the Federal Reserve’s target of 2%. The bank has also adjusted its GDP growth forecast downward to 1% for the period from the fourth quarter of 2024 to the fourth quarter of 2025 and predicts unemployment to rise to 4.5%.
Concerns Over Stagflation
Commentators have started voicing concerns that the U.S. economy may be heading towards stagflation—characterized by concurrent rising inflation and unemployment, reminiscent of economic conditions seen in the 1970s. David McWilliams, an Irish journalist and economic commentator, warns against this alarming combination of economic indicators.
Policy experts, including Alex Jacquez, chief of policy and advocacy at the Groundwork Collaborative, argue that the chaotic approach to trade and cuts to social programs pose risks exacerbating economic challenges for working-class families, potentially setting the stage for stagflation.
In conclusion, as the Trump administration’s tariff strategies unfold, the implications for the U.S. economy continue to draw scrutiny from economists and policymakers alike.
