Goldman Sachs has reversed its recession forecast after President Donald Trump announced a 90-day pause on most of the administration’s new tariffs, calming markets rattled by trade war fears.
Earlier on Wednesday, Goldman analysts had shifted to a recession baseline following the rollout of new country-specific tariffs. However, after Trump’s announcement, the firm updated its outlook to a “non-recession baseline,” projecting modest GDP growth of 0.5% by Q4 2025. Additionally, Goldman Sachs now expects three Fed rate cuts starting in June, according to CNBC reporting.
Markets responded quickly to the news. Bitcoin surged past $82,000, and the Nasdaq approached a 10% gain, recovering from its worst multi-day performance since the 2008 financial crisis. The 10-year Treasury yield eased from 4.5% to 4.4%, further indicating a positive market reaction.
President Trump, in a post on Truth Social, stated that multiple countries had initiated talks over trade and currency, prompting the tariff pause and a temporary reduction of the reciprocal tariff rate to 10%. However, it was noted that tariffs on Chinese imports were raised to 125%, effective immediately, indicating a continued tough stance on China.
Following the update, Goldman Sachs now estimates a 45% chance of recession and expects core inflation to peak at 3.5%, according to its latest client note. This change in economic outlook came after four days of intense market volatility and mounting fears of a global recession.
The move was also marked by a significant development in trade negotiations, with Treasury Secretary Scott Bessent set to lead upcoming talks. Wall Street views this development positively due to Bessent’s moderate stance, potentially paving the way for more stable trade relations.