Goldman Sachs Drops Recession Forecast as Trump Hits Pause on Tariffs

Goldman Sachs has walked back its recession forecast after a surprising policy shift from President Donald Trump brought some calm to an otherwise rattled market. Trump’s announcement of a 90-day pause on most of the newly proposed tariffs — following mounting pressure from investors and foreign governments — helped cool down recession fears that had surged just hours earlier.

Earlier in the day, Goldman had flipped to a recessionary base case, prompted by the administration’s rollout of new country-specific tariffs. But following Trump’s remarks, which included a temporary reduction of reciprocal tariffs to 10%, the investment bank reversed course. Goldman now expects the U.S. economy to grow at a modest 0.5% by Q4 2025, and it anticipates the Federal Reserve will deliver three interest rate cuts beginning in June.

Markets quickly responded to the change in tone. Bitcoin surged past $82,000, snapping back from recent lows, while the Nasdaq posted a sharp rebound, rising nearly 10% after suffering its worst multi-day stretch since the 2008 financial crisis. Bond yields dipped as well — the 10-year Treasury yield eased from 4.5% to 4.4%, reflecting renewed investor appetite for risk.

Despite the broader tariff pause, the administration maintained a hard stance on China. Tariffs on Chinese imports were raised to 125% effective immediately, signaling that while the U.S. is willing to ease pressure globally, Beijing remains a specific target. Trump, in a Truth Social post, framed the move as a gesture of goodwill in response to “constructive” dialogue from multiple nations on trade and currency stabilization.

Goldman’s revised outlook reflects cautious optimism. While the firm no longer sees a recession as its baseline, it still pegs the probability of an economic downturn at 45%. Inflation remains a concern, with core CPI projected to peak around 3.5%. Nonetheless, analysts point to the shift in tone from both Washington and the Fed as key reasons for optimism in the near term.

Perhaps the most encouraging development for markets is the appointment of Treasury Secretary Scott Bessent to lead upcoming trade negotiations. Wall Street views Bessent’s pragmatic stance as a stabilizing force in a highly volatile macro environment. For now, investors are breathing a little easier — though with inflation lingering and geopolitics still in play, the relief may prove temporary.