US' Chances of Recession Inch Dangerously Close to 50 Percent As Trump Backs Sweeping Tariff Play

Goldman Sachs has increased its forecast of a U.S. recession to 45%, also slashing the economic growth expects to 0.5% as President Donald Trump's tariffs roil markets and spread uncertainty in the global economy.

In a note titled "US Daily: Countdown to Recession," the bank said it is increasing the probability of a downturn by 10 percentage points, from 35% to the current 45%. It cites "a sharp tightening in financial conditions, foreign consumer boycotts, and a continued spike in policy uncertainty" as a result of the tariffs announcement.

In the document, Goldman analysts said they expected Trump to scale back its announcement, likely as a negotiation tool. However, new tariffs scheduled for Wednesday would lift it more than expected. It added that China's retaliatory tariffs on U.S. exports were also more aggressive than expected.

"It also suggests that the sensitivity of financial conditions to incremental tariffs is rebounding from the moderate levels of early 2025 toward the more outsized levels observed in the 2018-2019 trade war," reads a passage of the note.

The analysis also takes into account "reduced foreign tourism to the U.S. and foreign consumer boycotts," as well as "measures of policy uncertainty." "The effects of policy uncertainty are likely to be much larger than in the first trade war because far more US companies are likely to be affected by uncertainty about the much larger and broader US and foreign tariffs this time, and some could also be affected by uncertainty about other policy areas, such as fiscal and immigration policy," the note adds.

Goldman Sachs is far from alone in its analysis. JPMorgan CEO Jamie Dimon also warned on Monday that the tariffs will fuel inflation and slow growth, claiming there are "many uncertainties surrounding the new tariff policy."

"The quicker this issue is resolved, the better because some of the negative effects increase cumulatively over time and would be hard to reverse. In the short run, I see this as one large additional straw on the camel's back," he added.

Dimon did acknowledge the U.S. is right to protest on some aspects of its trade relations, but claimed the answer lies in negotiations, especially with its allies. He called for the strengthening of alliances to "win the new global 'economic' war" as a way to deter autocrats and preserve the economy across the globe.

Pershing Square CEO Bill Ackman also gave his two cents, saying the world faces an "economic nuclear winter" if Trump doesn't pause the measure. "The President has an opportunity on Monday to call a time out and have the time to execute on fixing an unfair tariff system. Alternatively, we are heading for a self-induced, economic nuclear winter, and we should start hunkering down," Ackman said in a post on X.

In the meantime, Trump trade advisor Pete Navarro urged investors not to panic. He said the unfolding circumstances could lead to a "beautiful situation," predicting the Dow would ultimately reach 50,000 and promising a "broad-based recovery in the S&P 500."