On the eve of "April 2," Goldman Sachs significantly raised its expectations for U.S. tariffs and recession, predicting that the "reciprocal tariff rate" will average 15%!

On the eve of "April 2," Goldman Sachs sounded the alarm for a recession.

According to a report from Dow Jones Newswires, Goldman Sachs has significantly raised the probability of the U.S. economy entering a recession in the next 12 months from the previous 20% to 35%, nearly doubling it.

This pessimistic outlook is primarily due to the "reciprocal tariff" policy that the Trump administration is set to announce on April 2. Goldman Sachs expects this policy to impose an average reciprocal tariff of 15% on all U.S. trading partners, resulting in an average U.S. tariff rate increase of 15 percentage points, higher than the previously predicted 10 percentage points.

Goldman Sachs warned:

“Our increase in the recession probability reflects our lower baseline economic expectations, a sharp deterioration in household and business confidence, and comments from White House officials indicating a greater willingness to tolerate short-term economic weakness to achieve their policy goals.”

In the report, Goldman Sachs also raised its inflation expectations and lowered its GDP growth expectations, increasing the forecast for the core PCE price index at the end of 2025 by 0.5 percentage points to 3.5%, while lowering the GDP growth forecast by 0.5 percentage points to just 1.0% (year-on-year quarterly), and expects the unemployment rate to rise to 4.5%.

Goldman Sachs: The Federal Reserve will cut interest rates three times this year, and the risk of a hard landing for the economy is rising

As the economic outlook worsens, Goldman Sachs also predicts that the Federal Reserve will cut interest rates three times in 2025—specifically in July, September, and November, ultimately maintaining the federal funds rate forecast at 3.50-3.75%.

Previously, Goldman Sachs had expected that the Federal Reserve would not cut rates again this year and would only have one rate cut in 2026. Goldman Sachs stated:

“While the Federal Reserve has downplayed the impact of rising inflation expectations so far, we believe this has indeed raised the threshold for rate cuts, especially with a greater emphasis on the potential rise in the unemployment rate as a reason for cutting rates.”

Worryingly, Goldman Sachs also expects the fundamentals of the U.S. economy to weaken, with increased consumer vulnerability, forecasting that real income growth in 2025 will be only 1.4%, significantly lower than recent years.

Goldman Sachs warned:

“Although sentiment has not been a good predictor of activity in recent years, we do not take the recent decline in sentiment lightly, as the economic fundamentals are not as strong as in previous years.”

Analysis indicates that this suggests the U.S. economy may be entering a more vulnerable phase, where market sentiment and policy risks could have a greater drag on the economy than in recent years