Goldman Sachs expects U.S. economic growth to slow to 1.1% in 2025 due to rising tariffs and inflation.
Goldman Sachs says the U.S. economy is heading into a period of slower growth, projecting GDP will rise just 1.1% in 2025.
The investment bank cites the drag from rising tariffs, which it says will offset benefits from looser financial conditions.
“Even a one-time price increase will eat into real income, at a time when consumer spending trends already look shaky,” said Goldman’s chief economist Jan Hatzius in a client note.
Hatzius expects inflation, as measured by the Fed’s preferred PCE index, to hit 3.3% in 2025. He forecasts a rise in effective tariff rates to 15% as President Trump’s policies unfold, fueling higher prices and stagnating consumer spending.
The firm places recession risk at 30%, double the historical average.
While some indicators such as retail sales and consumer sentiment are improving, Goldman expects potential job losses and supply chain disruptions could prompt the Fed to consider rate cuts more aggressively than currently planned.