Goldman Sachs raises U.S. recession odds to 35 pct amid Trump tariff concerns

Goldman Sachs has raised the probability of a U.S. recession to 35 percent, up from 20 percent, as U.S. President Donald Trump's tariffs dampen the bank's economic outlook for the country.

In its release on Sunday, Goldman Sachs attributes the updated forecast largely to sharply declining household and business confidence, as well as White House officials' statements indicating greater willingness to tolerate near-term economic weakness in pursuit of their policies.

It warned that the Trump administration's latest tariffs plan, which is expected to be unveiled on Wednesday, is poised to incur greater risks than many market participants had previously assumed.

The bank predicts the average U.S. tariff rate will increase by 15 percentage points this year, five percentage points higher than its previous assumption, noting that higher tariffs are likely to boost consumer crisis.

It expects year-end 2025 core Personal Consumption Expenditures (PCE) inflation to stand at 3.5 percent on a yearly basis, significantly higher than its previous forecast of 2.8 percent and the Federal Reserve's two percent target. The year-end unemployment rate is expected to rise to 4.5 percent, it said.

Meanwhile, ordinary Americans expressed their concerns about Trump's policies in interviews with China Global Television Network (CGTN) outside the White House.

"I think it's a negotiation strategy. So it's going to be outrageous and something to catch everyone's attention, and eventually there will be some negotiation," said Heidi Fisher, a tourist from Illinois.

She added that the already high prices could probably keep going up, putting a strain on households.

"I am against it, but he has a plan. I don't know what his plan is. I have to wait and see it play out," said Charles Williams, a tourist from Pennsylvania.

"I'm a little bit worried about that. House prices, living costs, everything is so high. So we'll see what he can do. He just started - maybe he makes a good decision," said Chomki Mallic, another tourist from Pennsylvania.

Goldman Sachs raises U.S. recession odds to 35 pct amid Trump tariff concerns

Goldman Sachs raises U.S. recession odds to 35 pct amid Trump tariff concerns

Goldman Sachs raises U.S. recession odds to 35 pct amid Trump tariff concerns

Goldman Sachs raises U.S. recession odds to 35 pct amid Trump tariff concerns

U.S. stocks ended lower on Tuesday as climbing U.S. Treasury yields continued to weigh on investor sentiment.

The Dow Jones Industrial Average dropped 322.24 points, or 0.65 percent, to 49,363.88. The The Standard and Poor's 500 sank 49.44 points, or 0.67 percent, to 7,353.61, and the tech-heavy Nasdaq Composite Index shed 220.03 points, or 0.84 percent, to close at 25,870.71.

A primary source of downward pressure came from the fixed-income market. The yield on the benchmark 10-year U.S. Treasury note climbed back above 4.6 percent, while the 30-year Treasury yield nearly touched 5.2 percent, marking its highest level in nearly 19 years.

The high-yield environment acted as a drag on high-valuation growth sectors, which are particularly sensitive to elevated interest rates. Six of the 11 primary The Standard and Poor's 500 sectors closed in negative territory, with materials and communication services leading the declines by dropping 2.27 percent and 1.58 percent, respectively. In contrast, the healthcare sector gained 1.09 percent and the energy sector advanced 1.03 percent.

Market participants are also focusing on Wednesday's upcoming after-hours earnings release from Nvidia.

U.S. stocks close lower amid rising yields