Goldman Sachs reversed its recession forecast just moments after President Donald Trump announced a 90-day pause on his “Liberation Day” tariffs.
The investment giant had raised its recession outlook to a 65% probability earlier in the day following the rollout of country-specific tariffs, which briefly rattled markets. But after Trump’s surprise announcement to scale back the trade war, Goldman economists backtracked almost immediately, dialing the probability down to 45% and restoring their prior GDP growth forecast of 0.5%.
“Earlier today, before President Trump’s announcement, we had shifted to a recession baseline in response to the additional country-specific tariffs that went into effect this morning,” Goldman Sachs team of economists said, according to Bloomberg. The report is not yet publicly available. “We are now reverting to our previous non-recession baseline forecast.”
Trump’s 90-day pause applies to most U.S. trading partners and effectively reverts to a temporary universal 10% baseline while negotiations continue, the president said on X. The exception is China, which now faces a dramatic 125% tariff in what Trump calls a response to China “ripping off the U.S.A.” Goldman had specifically cited the economic impact of the newly announced tariffs earlier in the day when making its initial recession call, noting the policy would sharply increase the effective tariff rate on imports. But within an hour of Trump’s reversal, the firm issued a revised note, saying “we are now reverting to our previous non-recession baseline forecast.”
“At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other countries, is no longer sustainable or acceptable.” Trump said. “Conversely, and based on the fact that more than 75 Countries have called Representatives of the United States, including the Departments of Commerce, Treasury, and the USTR, to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non Monetary Tariffs, and that these Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately.”
The S&P 500 closed, buoyed by a 9.52% increase by market close Wednesday, with similar figures for the NASDAQ and Dow Jones Industrial Average. The soar in stock values followed a week of market nosediving after the “Liberation Day” tariffs initially went into effect.
(Featured Image Media Credit: Screen Capture/CSPAN)
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