Goldman Sachs has revised its U.S. tariff expectations sharply higher for 2025, warning that escalating trade tensions could weigh significantly on growth, inflation, and employment. In a note to clients, the bank said it now expects the average U.S. tariff rate to rise by 15 percentage points next year—up from a previous baseline of 10 percentage points and in line with its earlier risk scenario.

The upward revision is largely driven by the expectation that Trump will announce a sweeping “reciprocal tariff” regime averaging 15% across all U.S. trading partners on April 2. While exemptions for specific products and countries are likely, Goldman estimates the effective impact on average tariffs would still amount to a 9-point increase.

In response, the firm has raised its year-end 2025 core PCE inflation forecast by 0.5 percentage points to 3.5%, citing the inflationary impact of higher import costs. GDP growth is now projected to slow to just 1.0% on a Q4/Q4 basis, down 0.5 percentage points from prior estimates, while the unemployment rate is expected to climb to 4.5% by year-end. Reflecting the deteriorating outlook, Goldman has also increased its 12-month recession probability to 35%, citing weaker consumer and business sentiment and signs that policymakers may be more willing to accept near-term economic pain in pursuit of broader policy goals.

With real income growth already decelerating—projected to average just 1.4% in 2025—Goldman cautions that the economy may be entering a more fragile phase, where sentiment and policy risks exert greater drag than in recent years.