Goldman Sachs: "Tariffs Increase US Inflation and Unemployment Rate, Recession Probability at 30%"

Possibility of Three Rate Cuts Due to Economic Slowdown

"Mutual Tariffs to Raise US Average Tariff by 15%p, Expected to be 9%p After Negotiations" Prediction

Goldman Sachs expects that President Trump's aggressive tariffs will increase inflation and unemployment rates in the US, with economic growth nearly stalling. It also forecasts that due to the economic slowdown, the Federal Reserve and the European Central Bank will cut rates three times this year.

According to CNBC and other foreign media on the 31st (local time), Goldman Sachs estimates that the "mutual tariffs on the world" announced by Trump on April 2 will raise the average US tariff rate by 15 percentage points. This means that the average tariff rate on US imports from countries worldwide is expected to rise by 15 percentage points. However, through negotiation processes, some exceptions by country and item are expected to occur, ultimately reducing the increase to 9 percentage points. The premise is that negotiations will proceed by country regarding mutual tariffs.

Despite this, Goldman’s economic team led by Jan Hatzius stated that "the risks from mutual tariffs will have a more extensive negative impact on the US economy than the market had anticipated."

Due to the impact of tariff policies, Goldman expects core inflation based on personal consumption expenditures (PCE), excluding food and energy prices, to reach 3.5% this year. This is a 0.5 percentage point increase from the previous forecast (3%) and significantly exceeds the Federal Reserve's target of 2%.

This leads to weak economic growth, with the annual growth rate for the first quarter at only 0.2%, and from the fourth quarter of 2024 to the fourth quarter of 2025, it is expected to decrease by 0.5 percentage points to 1% annually compared to the previous forecast. The unemployment rate is also estimated to reach 4.5%, 0.3 percentage points higher than the previous forecast.

Goldman stated that the overall probability of a US recession in the next 12 months has increased from the previous 20% to 35%.

Low growth and high inflation indicate an increasing possibility of stagflation within the US. The last occurrence of stagflation in the US was in the late 1970s and early 1980s.

Due to concerns about stagflation, Goldman expects the Fed to cut rates three times in July, September, and November this year. The European Union (EU) is also expected to see rate cuts by the ECB in April, June, and July as growth prospects decline.

Goldman pointed out, "The Fed leadership has so far downplayed the possibility of rising inflation, but this seems to be to raise the bar for rate cuts, and attention should be paid to the emphasis on the possibility of rising unemployment as a reason for rate cuts."

Guest reporter Kim Jung-ah kja@hankyung.com