Key Developments:
- Goldman Sachs reduces the probability of a US recession to 35% from 45%
- The bank raises its US growth forecast for 2025 to 4.6%
- China’s GDP growth for 2025 is increased by six decimal points to 4.6%
- US and China agree to reduce tariffs for 90 days, benefiting the US economy
Background on Key Players:
Goldman Sachs is a leading global investment banking, securities, and investment management firm. Their economic forecasts and analyses are closely watched by investors, policymakers, and the general public. The firm’s recent adjustments to its US recession probability and growth forecasts reflect their updated views on the global economy, particularly in light of recent trade developments between the United States and China.
Trade Developments Between US and China:
On April 2, US President Donald Trump announced a series of “reciprocal” tariffs on Chinese imports. In response, the US and China agreed to reduce tariffs for 90 days. Under this agreement:
- US products entering China will face a 10% tariff
- Chinese products entering the US will face a 30% tariff
This represents a decrease from the previous 125% tariff on US products entering China and a 145% tariff on Chinese products entering the US during the height of the trade dispute.
Goldman Sachs’ Adjusted Forecasts:
Prior to the trade developments, Goldman Sachs had increased its assessment of a potential US recession to 35% on March 31, just days before Trump’s announcement of new tariffs. Following the announcement on April 7, the bank further increased the recession probability by an additional 10%.
However, with the recent trade agreement, Goldman Sachs has revised its outlook. The bank now sees a lower risk of recession in the US, reducing the probability to 35%. Furthermore, they have upgraded their growth forecast for the US economy in 2025 to 4.6%.
China’s Economic Outlook:
In addition to the adjustments in their US forecasts, Goldman Sachs has also improved its growth projection for China. The bank now anticipates that China’s GDP will expand by 4.6% in 2025, an increase of six decimal points from their previous estimate.
Key Questions and Answers:
- Q: What is the current probability of a US recession according to Goldman Sachs? A: 35%
- Q: How has Goldman Sachs adjusted its US growth forecast for 2025? A: The bank has increased the US growth forecast for 2025 to 4.6%
- Q: What changes have been made to China’s GDP growth forecast by Goldman Sachs? A: Goldman Sachs has raised its China GDP growth forecast for 2025 to 4.6%, up from the previous estimate.
- Q: How do the recent trade developments between the US and China impact Goldman Sachs’ forecasts? A: The reduction in tariffs has led Goldman Sachs to lower the risk of a US recession and improve growth forecasts for both the US and China.
