According to CNBC report
As U.S. President Donald Trump is set to announce a new round of tariff measures this week, investment bank Goldman Sachs predicts that the White House’s aggressive tariffs will drive up inflation and unemployment rates, and push economic growth into stagnation.
The investment bank currently estimates that tariff rates will rise by 15 percentage points; however, Goldman Sachs also points out that exemptions for products and countries will ultimately reduce the increase to 9 percentage points. The economic team at Goldman Sachs, led by global investment research head Jan Hatzius, believes that once the new trade measures are implemented, they will have widespread and negative impacts on the overall economy.
In terms of inflation, Goldman Sachs predicts that its preferred core measure (excluding food and energy prices) will reach 3.5% by 2025, which is 0.5 percentage points higher than previously forecasted and significantly above the Federal Reserve’s 2% target.
This will be accompanied by weak economic growth: an annualized growth rate of only 0.2% in the first quarter, with full-year growth (from Q4 2024 to Q4 2025) projected at 1%, marking a downward revision of 0.5 percentage points from earlier estimates. Furthermore, Goldman Sachs forecasts that the unemployment rate will rise to 4.5%, which is 0.3 percentage points higher than previously expected.
Overall, Goldman Sachs currently estimates that the probability of an economic recession in the U.S. within the next 12 months is 35%, up from the previous estimate of 20%.
Additionally, Goldman Sachs now anticipates that the U.S. Federal Reserve will cut interest rates three times this year (by 0.25 percentage points each time), an increase from the previous estimate of two cuts.
Goldman Sachs economists stated: “We have moved our previous expectation of a single rate cut by the Federal Reserve in 2026 to 2025, and now expect consecutive rate cuts in July, September, and November this year, which will keep our terminal rate forecast unchanged at 3.5% to 3.75%.” They are referring to the federal funds rate, which is currently at 4.25% to 4.50%.
