What Is the Probability of a US Economic Recession? Trump's Policy Reversals and Goldman Sachs' "Face-Changing Show"

As US President Trump's erratic tariff policies continued, Goldman Sachs staged a "face-changing show" on Wednesday in predicting the probability of a US economic recession.

On April 9 local time, Goldman Sachs released a report, raising the likelihood of a US economic recession to 65%. However, just over an hour later, the bank swiftly retracted this forecast, readjusting the recession probability to 45%. Before the Goldman Sachs team withdrew the 65% recession forecast, Trump's tariff policy underwent a "major reversal." He announced a 90-day suspension of reciprocal tariffs on certain countries.

"Earlier today, before President Trump announced this news, we had shifted to a recession baseline in response to the additional tariffs on specific countries that took effect this morning, but we have now reverted to our previous non-recession baseline forecast," said the Goldman Sachs team led by Jan Hatzius in a note.

Recently, Goldman Sachs has frequently updated its forecasts for a US economic recession.

Last Sunday, Goldman Sachs raised the probability of a US economic recession from 35% to 45% in a report, marking the bank's second upward revision of this indicator within a week. Last Monday, Goldman Sachs significantly increased the probability of a US economic recession over the next 12 months from 20% to 35%.

Goldman Sachs' "face-changing" underscores the difficulty of predicting the US economic trajectory amid Trump's frequent changes in trade policy.

Economists emphasize that trade policy uncertainty is a major risk facing the US economy, as businesses may delay investment and hiring until they have a better understanding of the long-term trade rules.

Goldman Sachs now believes the probability of a US economic recession is 45%, which remains higher than forecasts from several months ago.

When Trump was elected US President, the bank predicted only a 15% chance of a US economic recession, as the economy appeared to be heading for a "soft landing," with a resilient labour market and declining inflation.

Since then, Trump's protectionist trade policies and the uncertainty they have brought have increased the likelihood of rekindling US inflation, slowing economic growth, and rising unemployment.