Trump’s Tariff Pause: Goldman Sachs Revises Recession Forecast, Projects GDP Growth

In a significant shift reflecting the volatile nature of international trade policy, economic forecasts have been swiftly adjusted following a recent announcement from the White House. President Donald Trump’s administration declared a temporary halt to the implementation of broader tariffs, leading major financial institutions to reconsider their outlooks on U.S. economic health.

Tariff Pause Prompts Economic Reassessment

Markets experienced a noticeable uptick after President Trump revealed a 90-day suspension of planned tariffs affecting numerous U.S. trade partners. This move introduced a pause in escalating trade tensions, replacing the proposed measures with a temporary universal tariff rate of 10% while negotiations continue. However, this relief measure specifically excludes China, which remains subject to distinct and significantly higher tariffs currently set at 125%. The decision provided immediate, albeit potentially temporary, relief to markets previously unsettled by fears of an economic slowdown.

Goldman Sachs Reverses Recession Call

Responding rapidly to the President’s announcement, Goldman Sachs notably reversed its earlier, more pessimistic economic forecast. Prior to the tariff pause, the investment bank had increased its estimated probability of a U.S. recession to 65% and projected a potential 1% contraction in the Gross Domestic Product (GDP).

Following the policy shift, Goldman’s chief economist, Jan Hatzius, communicated a revised outlook. The bank adjusted its projections, now forecasting modest GDP growth of 0.5% for 2025. Concurrently, the estimated probability of a recession within that timeframe was lowered significantly to 45%.

Revised Economic Projections

Here’s a summary of Goldman Sachs’ updated forecast compared to their view just before the tariff announcement:

Metric	Forecast Before Tariff Pause	Forecast After Tariff Pause
Recession Probability	65%	45%
Projected 2025 GDP Change	-1.0%	+0.5%

Lingering Trade Tensions and Future Outlook

Despite the revised forecast, Goldman Sachs indicated that it still anticipates the possibility of President Trump implementing additional, sector-specific tariffs in the future. The exclusion of China from the 90-day tariff pause underscores the ongoing and unresolved trade dispute between the world’s two largest economies. While the immediate market reaction to the tariff suspension was positive, suggesting that easing trade restrictions can quickly alter economic sentiment, the longer-term outlook remains contingent on future policy decisions and the outcome of ongoing negotiations. Goldman Sachs acknowledged that a more comprehensive reversal of tariff policies by the White House could lead to further reductions in their recession risk assessment.