Goldman Sachs downgraded its outlook for U.S. economic growth as President Donald Trump's trade policy has proved to be more aggressive than expected, risking higher prices and tighter financial conditions. The Wall Street firm slashed its growth forecast on gross domestic product , a measure of all the goods and services produced across the sprawling U.S. economy in 2025, to 1.7% from a 2.4% estimate at the start of the year. This marks Goldman's first below-consensus outlook in 2½ years. "The reason for the downgrade is that our trade policy assumptions have become considerably more adverse and the administration is managing expectations towards tariff-induced near-term economic weakness," Jan Hatzius, Goldman's chief economist, said in a note to clients Monday. The economy has already been slowing, growing at a 2.3% annualized inflation-adjusted pace in the fourth quarter, lower than 3.1% in the third quarter. Goldman is warning that tariffs could raise consumer prices and tighten financial conditions, while leading companies to delay investments. The firm now sees the average U.S. tariff rate rising by 10 percentage points, doubling its previous forecast and about five times the increase seen in the first Trump administration. Last week, Trump imposed and quickly paused 25% tariffs on imports from Mexico and Canada for a month. He's set to impose broader "reciprocal" tariffs April 2 on foreign nations that have import taxes on U.S. goods. Meanwhile, the president has hiked levies on Chinese imports to 20% from 10%. "While President Trump ended up softening the 25% tariff on Canada and Mexico soon after implementation, we expect the next few months to bring a critical goods tariff, a global auto tariff, and a 'reciprocal' tariff," Goldman said. Hatzius said the reciprocal tariff could be the most damaging as it views Europe's 20% Value Added Tax as a tariff even though it is a consumption tax that is applied to nearly all goods and services bought and sold for use in the European Union.
