On Monday, Goldman Sachs Group, Inc. revised its forecast downward for U.S. Gross Domestic Product (GDP) growth.
This adjustment reflects growing concerns that U.S. President Donald Trump’s aggressive tariff and trade protection policies will lead to higher inflation in the U.S. and tighter financial conditions.
Consumers will likely spend more on essential goods as prices rise, reducing discretionary spending that drives economic growth.
Consumer spending is a critical economic indicator, accounting for roughly 70% of the U.S. GDP.
2.4→1.7%
According to CNBC, Goldman’s chief economist Jan Hatzius recently slashed this year’s U.S. GDP growth forecast from 2.4% at the beginning of the year to 1.7%.
This is the first time in two and a half years that Goldman has projected growth below general market expectations.
Hatzius explained that the downward revision reflects Goldman’s increasingly pessimistic outlook on trade policy, noting that the Trump administration’s tariffs are causing short-term economic weakness.
U.S. Economic Slowdown
The U.S. economy is already showing signs of slowing down.
The Atlanta Federal Reserve’s GDPNow, which provides real-time estimates of U.S. GDP growth, projected a 2.4% year-over-year contraction in the first quarter as of March 6.
This represents a stark reversal from the 3.1% growth in the third quarter of last year, which slowed to 2.3% in the fourth quarter before turning negative this year.
Goldman Sachs warned that tariffs will likely drive up consumer prices, tighten financial conditions, and delay investments from major corporations.
Reduced corporate investment could undermine the economy’s long-term growth potential.
On the same day, Goldman raised its U.S. tariff rate forecast by 10 percentage points, twice the previous estimate and nearly five times higher than the rates during Trump’s first term.
Last week, Trump wavered on his stance. He initially announced 25% tariffs on Mexico and Canada but partially delayed them for a month. He also planned to implement reciprocal tariffs starting April 2.
Goldman Sachs expressed pessimism, stating that while Trump eased the 25% tariffs on Canada and Mexico shortly after imposing them, tariffs on goods and automobiles and reciprocal tariffs are expected to continue rising in the coming months.
Hatzius emphasized that Trump’s intention to treat other countries’ value-added taxes (VAT) as tariffs and respond with corresponding reciprocal tariffs could inflict the most significant economic damage.
