Brad Gerstner, founder, chairman and CEO of Altimeter Capital, has given his views on President Donald Trump’s tariff announcement and response to the outlook for a recession.
Goldman Sachs updated its recession forecast on Sunday, adding that it could further downgrade the analysis if more tariffs were to be taken into account amid President Donald Trump’s tariff war.
An economist led by Jan Hatzius wrote in a memo entitled “Countdown to the Recession,” increasing the chances of a 12-month recession from 35% to 45%. They also cut their 2025 Gross Domestic Product (GDP) growth forecast to 0.5% from the fourth quarter, citing “a rapid tightening of financial position, boycotts of foreign consumers, and a continuing surge in policy uncertainty that is likely to hold back more than we had previously anticipated.”
Goldman economists said their baseline forecasts still assume that effective U.S. tariff rates will rise by 15 percentage points, and “will require a significant reduction in tariffs scheduled to come into effect on April 9th.”
“If a majority of the tariffs on April 9 are in effect, they will increase and as sector tariffs become effective, the tariff rate will rise at an estimated 20pp, which will even allow for a country-specific contract at a later date.
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Goldman Sachs increased its recession forecast and likely warned a further downgrade if tariffs were to be in effect. (Reuters/David Gray/File Photo/Reuters Photo)
Goldman Sachs analysis noted that while Trump’s 10% minimum tariffs have already been implemented, the “mutual” tariff plans calculated by the administration based on bilateral trade obstacles are expected to come into effect on April 9.
The economist writes that the development trio has developed as growth outlook began to deteriorate amid the uncertainty of the lead until April 9th.
The first of these developments was for Trump to unveil his tariffs and tighten his financial position more than expected after China retaliated. They said it was partly because “both announcements were more aggressive than expected.”
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President Donald Trump presents a signed executive order during an event at the White House on April 2nd, which imposed tariffs on imports. (Andrew Harnik / Getty Images / Getty Images)
The economist also said the company’s analysis of foreign consumer boycotts and a decline in foreign tourism to the US could lead to a reduction of 0.1 to 0.2 percentage points in GDP. “Our forecasts had already taken on strong retaliation by foreign governments, but they didn’t take into account the impact of consumer-driven responses.”
The third factor that contributes to the decline in growth forecasts is that “measurements of policy uncertainty have skyrocketed to levels well above the levels reached during the last trade war.”
“The impact of policy uncertainty is likely to be much greater than the first trade war, as this time it is likely that much more US companies will be affected by uncertainty regarding other policy areas, such as fiscal and immigration policies,” the economist wrote.
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Duties are taxes on imported goods and are paid by importers who often pass higher costs to consumers at higher prices. (Photographer: Getty Images/Sam Wolf via Getty Images/Bloomberg)
Goldman Sachs said it expects the Federal Reserve to move forward with three consecutive 25-base cuts starting in July at its current private baseline.
In a recession scenario, Goldman Economists expect the Fed to cut around 200 basis points next year, and as the market approaches on Friday, their probability-weighted forecasts imply a 130 basis points interest rate cut this year.
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