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Goldman Sachs cuts US recession odds to 35% from 45% on trade truce optimism - REUTERS

MAY 13, 2025

(Reuters) - Goldman Sachs cut its recession forecast for the U.S. to 35% from 45%, the first major brokerage to do so, after a temporary tariff truce with China boosted hopes of some easing in the global trade war.

On Monday, the U.S. and China announced an agreement to significantly reduce tariffs on each other's imports for 90 days, with the U.S. lowering its tariffs on Chinese goods to 30% from 145% and China cutting duties on U.S. imports to 10% from 125%.

The brokerage also raised its 2025 GDP growth forecast for the U.S. by 0.5 percentage points to 1% on a quarterly basis, it said in a note released on Monday.

Goldman now expects the Federal Reserve to deliver just one rate cut in December, down from its earlier forecast of three for this year. It sees two additional cuts in March and June 2026.

"The rationale for rate cuts shifts from insurance to normalization as growth remains somewhat firmer, the unemployment rate rises by somewhat less, and the urgency for policy support is reduced," the brokerage said.

(Reporting by Joel Jose in Bengaluru; Editing by Sonia Cheema)

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