Goldman Sachs sees Trump tariffs spiking inflation, stunting growth and raising recession risks

Financial services giant, Goldman Sachs, has predicted that the aggressive tariff impositions from the Trump administration are likely to raise inflation, increase unemployment, and drag the rate of economic growth to a near standstill.

In a note released on Sunday, the firm stated, "we continue to believe the risk from April 2 tariffs is greater than many market participants have previously assumed."

As a result of this outlook, Goldman Sachs raised its forecast for inflation this year to 3.5%, marking a significant increase from previous estimations. The firm also cut its Gross Domestic Product (GDP) outlook to a meager 1%, indicating a strong belief in the stunting impact of the tariffs on economic growth. In addition, the firm raised its unemployment view to 4.5%, suggesting an increase in joblessness due to the economic slowdown.

These predictions come in the wake of the Trump administration's recent tariff impositions on a range of imported goods, particularly those from China. These tariffs have sparked global concerns over a potential trade war, which could have wide-ranging impacts on the international economy.

The tariffs are part of President Trump's broader strategy to reduce the US trade deficit, particularly with China. However, many economists have warned that such aggressive trade policies could backfire, leading to higher costs for American businesses and consumers, and potentially triggering a recession.

Goldman Sachs' latest projections add to these concerns, suggesting that the tariffs could indeed have a significant negative impact on the US economy. However, it remains to be seen how these predictions will play out in the face of ongoing trade negotiations and potential policy changes.

The firm's note concluded by stating, "the risks are clearly skewed to the downside, and we continue to see a significant risk of a more severe outcome."

This warning from one of the world's largest investment banks underscores the potential dangers of the current trade policies and serves as a stark reminder of the possible consequences of a full-blown trade war.