Goldman Sachs Revises U.S. Recession Forecast Amid Tariff Truce

Goldman Sachs reduced its U.S. recession forecast following a tariff reduction agreement between the U.S. and China. This development prompted Goldman to revise its GDP growth projection and Federal Reserve rate cut expectations. The broker also increased the S&P 500 year-end target, while Citigroup adjusted its rate cut forecast.

Goldman Sachs has lowered its recession forecast for the United States from 45% to 35%, marking it as the first major brokerage to make such a revision. This decision follows the recent temporary tariff truce between the U.S. and China, which has spurred optimism about the possibility of easing tensions in the ongoing global trade war.

On Monday, both countries agreed to a mutual reduction of tariffs on each other's imports for 90 days. The U.S. will reduce tariffs on Chinese goods to 30% from 145%, while China will lower tariffs on U.S. imports to 10% from 125%. Previously, global brokerages had increased the likelihood of a U.S. and global recession amid concerns that trade tariffs could undermine business confidence and dampen economic growth.

Goldman Sachs has also adjusted its 2025 GDP growth outlook for the U.S., raising it by 0.5 percentage points to 1%. It now projects three rate cuts from the Federal Reserve in the period spanning 2025 to 2026, moving the initial reduction to December instead of July, with subsequent cuts anticipated in March and June next year. The shift in rationale for these rate cuts aligns with a more stable growth environment and reduced urgency for policy support. Additionally, Goldman has increased its year-end target for the S&P 500 index to 6,100 points from 5,900, citing diminished risks of tariffs and recession. Meanwhile, Citigroup announced a change in its expectations for a Fed rate cut, adjusting it to July from June.

(With inputs from agencies.)