Goldman Sachs hikes recession probability to 45 percent

Goldman Sachs analysts are again raising the odds of a recession as markets continue to reel in the wake of President Trump’s sweeping tariff actions.

The bank warned in a new report on Sunday that it increased the probability of a recession in the U.S. to 45 percent, just a week after it forecasted odds at 35 percent as fears rise of an impending trade war.

Stocks fell again at the start of the week amid blowback over Trump’s latest move imposing hundreds of billions of dollars in new taxes on foreign goods.

The Dow Jones Industrial Average fell 1,400 points, marking a 3.5 percent drop. The S&P 500 index dipped 3.7 percent and the Nasdaq composite also fell 3.7 percent upon the market’s reopening. 

World markets have also taken a hit.

In defending his latest tariffs over the weekend, Trump argued that the U.S. has been taken advantage of by other countries for years on trade.

“When you look at the trade deficit we have with certain countries, with China it’s a trillion dollars,” Trump said.

“We have to solve our trade deficit with China. … Hundreds of billions of dollars a year we lose with China. And unless we solve that problem, I’m not going to make a deal,” Trump also said, adding “this is not sustainable.”

However, in Goldman’s latest forecast, the bank also projects slower economic growth this year, as other banks are also warning of increased risk of a recession.  

In a note to investors last week, J.P. Morgan warned that gross domestic product (GDP) would likely contract “under the weight of the tariffs.”

“The pinch from higher prices that we expect in coming months may hit harder than in the post-pandemic inflation spike, as nominal income growth has been moderating recently, as opposed to accelerating in the earlier episode,” chief U.S. economist Michael Feroli said then.