Goldman Sachs has withdrawn its recession forecast after President Donald Trump unexpectedly announced a 90-day pause on most new tariffs, easing widespread market concerns about a potential trade-induced downturn.
The decision marks a sharp pivot from earlier in the day, when Goldman analysts shifted to a “recession baseline” following Trump’s rollout of new country-specific tariffs. However, after the White House revealed a temporary tariff freeze, Goldman updated its outlook to a “non-recession baseline”, now projecting modest GDP growth of 0.5% by Q4 2025 and anticipating three Federal Reserve rate cuts starting in June, according to CNBC.
Markets Rally on Reprieve
Financial markets reacted swiftly to the announcement:
- Bitcoin surged past $82,000,
- The Nasdaq rebounded close to a 10% gain, recovering from one of its steepest declines since the 2008 financial crisis,
- The 10-year U.S. Treasury yield eased from 4.5% to 4.4%.
In a post on Truth Social, Trump said the tariff pause came after multiple countries engaged in trade and currency negotiations, prompting a temporary scale-down of reciprocal tariffs to 10%. However, tariffs on Chinese imports were raised to 125%, effective immediately.
Goldman’s Revised Outlook
In its latest note to clients, Goldman Sachs now pegs the probability of a U.S. recession at 45%, down from over 60% earlier in the week. The firm expects core inflation to peak at around 3.5%, which aligns with a path toward gradual monetary easing by the Fed.
New Face in Trade Talks
Goldman also highlighted the appointment of Treasury Secretary Scott Bessent to lead upcoming trade negotiations—a move seen positively by Wall Street due to Bessent’s moderate and pragmatic approach.
