Goldman Sachs has revised its forecast for the U.S. economy, lowering expected growth for this year to just 1.7%, down from the previous estimate of 2.4%. The main reason behind this downgrade is the escalation of the trade war under President Donald Trump. Wall Street has reacted sharply, with stock markets suffering significant losses due to fears of a potential recession. The Nasdaq index fell by 5%, while the S&P 500 dropped 4.6%. Investment bank Morgan Stanley has warned of further losses if Trump continues with his aggressive trade policies.
Goldman Sachs economist Jan Hatzius pointed to rising consumer prices, tighter financial conditions, and policy uncertainty as the key drivers of the economic slowdown. The bank now sees a 20% probability of a recession, warning that Trump may be forced to ease tariffs in order to avoid economic turmoil. JP Morgan has expressed similar concerns, emphasizing that the U.S. risks triggering a global recession if trade tensions continue to rise—especially in its dealings with Europe.
President Trump has downplayed fears of a recession, stating: “This is a transitional period because what we’re doing is very big.” Nevertheless, economists are increasingly warning of a potential economic downturn. Bruce Kasman from JP Morgan estimates a 40% chance of a global recession, blaming U.S. policies for eroding business confidence and spending. Even if a full-blown trade war is avoided, ongoing uncertainty could still slow global economic growth.
Analysts at BCA Research have warned of an impending U.S. recession due to a “chain of negative economic news.” Meanwhile, Commerce Secretary Howard Lutnick has dismissed these concerns, stating: “There will be no recession in America. Donald Trump is a winner.” He forecasted unprecedented economic growth in the years ahead.
The Federal Reserve Bank of Atlanta is projecting a 2.4% contraction in the U.S. economy for the first quarter of the year—a dramatic reversal from the 2.3% growth recorded at the end of 2024. Analysts attribute this shift to businesses stockpiling goods ahead of the new tariffs, which may result in a temporary rebound. However, economist Paul Dales has warned of increasing risks due to political uncertainty and inflation.
While some countries, like Canada and Mexico, may face recessions due to their exposure to U.S. tariffs, others—such as Europe, China, and the United Kingdom—could experience economic hardship without falling into full recession.
In the U.K., analysts from Policy Exchange have advised the government to stockpile microchips and pharmaceuticals in anticipation of potential trade restrictions from the U.S. They recommended emergency plans to ensure the continued operation of critical industries for at least 90 days in the event of major supply chain disruptions.
