Wall Street Divided on Recession Outlook Amid Trump’s Tariff Suspension
by Lee Seunghyeong
Published 10 Apr.2025 14:24(KST)
Updated 10 Apr.2025 14:30(KST)
Goldman Sachs: "There is room for tariff rates to be lowered through negotiations"
JP Morgan: "Concerns over damaged market confidence... Recession risk remains"
After U.S. President Donald Trump announced a 90-day suspension of reciprocal tariffs by country, Wall Street's outlook on a U.S. economic recession has become divided.
On the 9th (local time), Goldman Sachs stated, "Before President Trump's announcement, our baseline scenario was a recession. But now we are reverting to a scenario where there will be no recession."
Previously, Goldman Sachs had estimated a 65% probability of the U.S. entering a recession within the next 12 months, noting, "We believe the White House is unlikely to quickly withdraw most of the new tariffs, but if they do, the probability of a recession would decrease."
Subsequently, President Trump announced on the social networking service Truth Social that reciprocal tariffs on countries other than China would be suspended for 90 days. In response, Goldman Sachs said, "This recession will be less severe than most past cases," explaining, "Because there are no major imbalances in the overall financial system that need to be resolved, and the private sector's financial health is also sound." They added, "There is also room for some tariff rates to be lowered through future trade negotiations."
On the other hand, JP Morgan judged that the possibility of a recession remains despite President Trump's tariff suspension. In a report released that day, JP Morgan analyzed, "Considering the ongoing turmoil in trade and U.S. domestic fiscal policy, along with diminished market confidence, it is difficult to see the U.S. avoiding a recession."
They continued, "The withdrawal of aggressive country-specific tariffs is fundamentally a positive step. However, not all conditions are the same, and a comprehensive interpretation of the current situation remains concerning," warning, "The trade war is not over with this; the real conflict may just be beginning."
In particular, JP Morgan pointed out that the maintenance of a universal 10% tariff is a significant shock to the economy, which could have an impact 7.5 times greater than the shock during the 2018?2019 trade war. JP Morgan noted, "What is even more shocking is that tariffs on Chinese products have been raised up to 125%." According to JP Morgan, these high tariffs could result in American consumers bearing additional taxes amounting to $860 billion.
Citigroup also predicted that trade uncertainties would persist, forecasting that the average effective tariff rate in the U.S. could rise by about 21% due to the 10% base tariff, additional tariffs on Chinese imports, and sector-specific tariffs on steel, automobiles, and others.
In a report, Citigroup stated, "We do not expect a significant change in the macroeconomic outlook due to the news that President Trump has suspended tariffs," analyzing, "The suspension of reciprocal tariffs excluding China does not mean the U.S. economy has avoided growth slowdown and rising inflation."
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