Goldman Sachs has revised its U.S. recession forecast from 35% to 45% chance of an economic downturn within the next 12 months.
This updated outlook comes amid growing concerns over the economic impact of newly imposed tariffs, which have begun to create ripple effects across various sectors.
The firm attributes the increased risk to the negative consequences of the tariffs on both domestic and international supply chains.
As the U.S. imposes new tariffs on a wide range of imported goods, costs for businesses are rising and global trade is facing a series of disruptions.
The immediate concern is how these tariffs will translate into higher consumer prices, which could potentially reduce household spending—a key driver of economic activity.
Goldman Sachs warns that the tariffs may have a broader impact on business sentiment, particularly among manufacturers, retailers, and tech companies that rely on imported goods for production.
These industries could experience increased operational costs, which may lead to delays, reduced profitability, and potential job cuts.
Also, inflationary pressures are expected to intensify as a result of the tariffs, further dampening consumer confidence. If consumers begin to cut back on spending due to higher prices, this could slow economic growth significantly, thereby increasing the likelihood of a recession.
While the firm does not foresee an immediate recession, Goldman Sachs acknowledges that the economic environment is becoming increasingly uncertain.
The impact of the tariffs will largely depend on how trade relations evolve, as well as any further actions taken by the U.S. government to address the growing trade imbalance.
Investors are advised to remain cautious, as the heightened risk of a recession could lead to increased market volatility.
Goldman Sachs also recommends that businesses take proactive steps to assess their exposure to tariff-related risks and prepare for potential disruptions in the months ahead.
As the trade conflict continues, all eyes will be on U.S. policymakers and global trade negotiations to determine whether further tariffs will be imposed and whether economic conditions will stabilize or worsen.
For now, the heightened recession risk remains a critical factor that could shape the economic landscape in the coming year.
