Stocks surge despite tariff-related economic concerns, say Wall Street Journal reports
Wall Street economists are ringing alarm bells over the possibility of tariffs sparking a U.S. economic downturn. Goldman Sachs, for one, puts the odds of a recession within the next year at a chilling 45%. Apollo Global Management's chief economist, however, paints an even grimmer picture, assigning a staggering 90% chance of a recession.
Goldman Sachs has revised its 12-month recession probability from 35% to 45%, primarily due to tariff-induced policy uncertainty and decreased capital spending. The firm predicts that by 2025, the U.S. GDP growth will be a mere 0.5%, marking a significant drop from 2024's robust 2.8%.
TD Securities estimates a 50% recession risk following the "rougher-than-expected" April 2 tariffs. Meanwhile, the International Monetary Fund (IMF) has decreased its 2025 U.S. growth forecast to 1.8%, with tariffs accounting for 0.4 percentage points of the reduction. The IMF also increased U.S. inflation projections by 1 percentage point due to tariffs.
According to FactSet consensus, the 2025 GDP growth is expected to be 1.9%, reflecting slower consumer spending brought about by tariff-related price shocks.
Tariff costs being passed onto consumers could potentially strain consumer spending, leading to a decrease. Moreover, U.S. tariffs have triggered retaliatory measures, creating a deflationary shock for trading partners like China (growth reduced to 4%) and the euro area (growth at 0.8%).
Economists from Goldman Sachs, Apollo Global Management, TD Securities, and the International Monetary Fund (IMF) have collectively expressed high odds of a U.S. recession, with Goldman Sachs seeing a 45% chance and Apollo Global Management predicting an alarming 90%. These estimates are partly due to the impact of tariffs on capital spending and policy uncertainty within the finance sector. Moreover, the anticipated tariff costs being passed onto consumers could potentially lead to a decrease in consumer spending, causing concern for the broader business and economic landscape.
