Goldman Sachs’ chief economist just cut his US GDP forecasts from 2.4% to 1.7% for this year

For over two years, Goldman Sachs has been one of the Wall Street optimists, putting out rosier forecasts than its peers when it comes to the US economy. But amid rising trade tensions, that no longer seems to be the case.

In a note published late on Monday, Jan Hatzius, the firm’s chief economist and head of global investment research, slashed his US GDP growth forecast from 2.4% to 1.7%. That is now below Bloomberg’s consensus of 2%, as its trade policy outlook has become “considerably more adverse.” 

Goldman now expects the average US tariff rate to jump by 2x its previous forecast and 5x higher than in President Trump’s first term — with “reciprocal” tariffs being the biggest driver. According to Hatzius, these tariffs drag on growth, as higher prices dampen consumer spending power and policy uncertainty makes firms “delay investments.”  

Goldman also raised its core PCE inflation forecast to 3% later this year, up from its previous estimate of ~2.4%, as the tariff hikes ripple through the economy.

With Trump himself refusing to rule out a recession in 2025, analysts are turning more bearish on the US economy: last week, Morgan Stanley cut its GDP growth outlook from 1.9% to 1.5%, while the Atlanta Fed now estimates the economy could contract by 2.4% in Q1.