Aniket PujariAnalysts at Goldman Sachs have raised US tariff assumptions for the second time in less than a month, expecting the average tariff rate to rise 15 percentage points in 2025.
Terming the revision a “more aggressive assumption for reciprocal tariffs” Goldman Sachs said it expects US President Donald Trump to announce an average 15 per cent reciprocal tariff on all US trading partners on April 2.
The global financial firm, however, added that it expects some product and country exclusions, which could adjust the addition to the average US tariff rate to 9 percentage points.
“We expect President Trump to announce reciprocal tariffs that average 15 per cent across all US trading partners on April 2, although we expect product and country exclusions to ultimately whittle the addition to the average US tariff rate down to 9 percentage points,” said Goldman Sachs in a note on March 30.
Higher US tariffs to drive up inflation, weigh on growth
Goldman Sachs echoed concerns that higher US tariffs could drive up inflation by raising consumer prices, ultimately weighing on GDP growth in the world’s largest economy. A slowdown in economic growth could, in turn, lead to a rise in the unemployment rate.
“Higher tariffs are likely to boost consumer prices, and we have lifted our year-end 2025 core PCE (Personal Consumption Expenditures) inflation forecast by 0.5 percentage points to 3.5 per cent year-on-year,” Goldman Sachs said.
“Reflecting both the tariff news and a decline in our Q1 GDP tracking estimate to just 0.2 per cent, we have also lowered our 2025 GDP growth forecast by 0.5 percentage points to 1 per cent on a Q4-to-Q4 basis and by 0.4 percentage points to 1.5 per cent on an annual average basis. Because of the GDP growth downgrade, we have raised our year-end 2025 unemployment rate forecast by 0.3 percentage points to 4.5 per cent,” said Goldman Sachs.
Considering lower growth, sharp deterioration in household and business confidence, and willingness of the US administration to tolerate near-term economic weakness in pursuit of their policies, Goldman Sachs now sees a 35 per cent probability of a 12-month recession in the US against a 20 per cent probability earlier.
“While sentiment has been a poor predictor of activity over the last few years, we are less dismissive of the recent decline because economic fundamentals are not as strong as in prior years. Most importantly, real income growth has already slowed sharply, and we expect it to average only 1.4 per cent this year,” Goldman Sachs said.
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Disclaimer: This story is based on a Goldman Sachs report available on public platforms. It is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
