US President Donald Trump has announced that his administration has signed a contract with elite law firms Skadden, Arps, Slate, Meagher & Flom at a ceremony to sworn at an oval-shaped White House ceremony on March 28, 2025 in Washington, DC.
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With the decision day approaching this week due to President Donald Trump’s latest tariffs, Goldman Sachs hopes that aggressive obligations from the White House will raise inflation and unemployment, dragging economic growth to a near halt.
Investment banks currently expect tariff rates to jump 15% points. This is a previous “risk case” scenario that appears likely that Trump will announce mutual tariffs on Wednesday. However, Goldman noted that the product and country exclusion ultimately reduced that increase to 9% points.
As new trade moves are enacted, Jan Hatzius of the Goldman Economic Team, led by global investment research directors, has had a wide and negative impact on the economy.
In a memo released Sunday, the company said, “We continue to believe that the risk from the April 2nd tariffs is greater than many previously assumed market participants.”
Inflation exceeds target
On inflation, the company is looking at its preferred core measurements excluding food and energy prices, reaching 3.5% in 2025, an increase of 0.5 points from previous forecasts and well above the Federal Reserve 2% target.
This means weak economic growth. Annual growth rate of just 0.2% in the first quarter, 1% per year for the year measured from the fourth quarter of 2024 to the fourth quarter of 2025, down 0.5 percentage points from the previous forecast. Additionally, the Wall Street company believes its unemployment rate is at 4.5%. This is up 0.3 percentage points from previous forecasts.
Taken together, Goldman expects a 35% chance of a recession over the next 12 months, up from the previous forecast of 20%.
The forecasts increase the likelihood of a stag economy with low growth and high inflation. The last time the US saw stagflation was in the late 1970s and early 1980s. At the time, the Paul Volker-led Fed dramatically raised interest rates and brought the economy into a recession as the central bank chose to support economic growth.
Three rate reductions
Goldman’s economists don’t think so this time. In fact, the company expects the Fed to cut its benchmark rate three times this year.
“The Fed forecast has pushed the only 2026 cut in 2025 forward, but we look forward to three consecutive cuts this July, September and November.
The latest tariff coverage is still unknown, but the Wall Street Journal reported on Sunday that Trump is pushing his team towards a more aggressive taxation.
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