- Goldman Sachs slashed its recession forecast not long after raising the odds of a downturn amid trade war whiplash.
- The bank’s forecasts were walked back an hour after Trump dialed back most tariffs on Wednesday.
- The bank now sees a 45% chance the economy could tip into recession in the next year.
The wild trade war saga is causing recession forecasts to whipsaw at one of Wall Street’s top banks.
Goldman Sachs waffled on its recession call on Wednesday, with analysts raising their predicted probability of a recession for the third time before slashing their new forecast in the afternoon after Trump announced a 90-day pause and walked back most of his recently unveiled reciprocal tariffs.
The bank now sees a 45% probability of a recession in the next year, the same odds analysts originally predicted last week.
Trump isn’t pausing all his tariffs. During the 90-day reprieve, the White House will keep a 10% across-the-board tariff in place, the president said Wednesday on Truth Social. The administration is also raising China’s tariff rate to 125%, he added.
Still, the newest tariff plan is more in line with what Goldman originally anticipated for Trump’s trade policy, the bank said in a note, explaining why it was cutting its recession probability from 65% back to 45%.
“As a result, we are reverting to our non-recession baseline forecast with GDP growth of 0.5% and a 45% probability of recession,” analysts wrote an hour after most tariffs were lifted.
Last week, Goldman raised its 12-month probability of a recession from 35% to 45%. Analysts said the bank intended to change its baseline forecast to a recession if Trump implemented his new tariffs on Wednesday.
Early Wednesday, as Trump’s new tariffs swung into effect, the bank raised its 12-month recession probability to 65%, adding that they believed it was “unlikely” that the White House would quickly reverse most of the tariffs.
The bank expected the overall US tariff rate to rise by at least 20 percentage points, given the tariffs Trump originally implemented on Wednesday. With the reduced 10% tariff, it now expects the overall US tariff rate to rise 15 percentage points, it added.
Goldman isn’t the only one feeling the whiplash. Stocks were in choppy waters Wednesday before staging a stunning reversal and rallying 9% after Trump announced the tariff reprieve. The Dow rose more than 2,700 points and the Nasdaq Composite was up 12%, its biggest gain since 2008.