Economic Forecast Dims Amid U.S. Tariff Threats

Goldman Sachs predicts more interest rate cuts by the Federal Reserve and ECB, lowering economic growth forecasts for the U.S. and Europe. This is due to increased recession risks from U.S. tariffs, with the average U.S. tariff rate expected to rise significantly, impacting global markets and economies.

Goldman Sachs has slashed its economic growth outlooks for both the U.S. and Europe, forecasting more interest rate cuts from the Federal Reserve and European Central Bank. The adjustments come amidst a backdrop of heightened recession risks due to President Donald Trump's looming tariffs, which are poised to target all trading partners globally.

Mounting concerns have led Goldman to increase the 12-month recession probability for the U.S. to 35% and adjust the GDP growth forecast for 2025 down to 1.5%. The firm anticipates that U.S. tariffs could rise by 15 percentage points, ahead of an expected announcement by Trump, set to occur on April 2, predicting an average of 15% reciprocal tariffs across U.S. trading partners.

Europe is expected to feel the economic impact even more severely, according to Goldman's analysis, with technical recession looming on the horizon. The brokerage projects little to no growth for the rest of 2025, with the euro area's GDP potentially facing a 1.2% reduction compared to a no-tariff scenario. Additional ECB rate cuts are forecasted to mitigate this adverse impact.

(With inputs from agencies.)