Is the US economy headed for a recession?

Leading economists say a recession is more likely than originally expected.

With new tariffs set to be launched on April 2, investors and economists are growing more concerned about an economic slowdown or recession.

On Sunday, research analysts at Goldman Sachs increased the odds of a recession in the U.S. in the next year to 35% from the previous 20%.

The reason is that Goldman Sachs sees many economic indicators moving in the wrong direction. For starters, Goldman Sachs’s projection for the first quarter gross domestic product (GDP) growth is just 0.2% — a steep drop from 2.4% growth in Q4 and 3.1% growth in Q3.

That is largely in line with a recent survey of economists by CNBC, which pegs the Q1 GDP in the same ballpark, at 0.3%.

For the year, Goldman Sachs expects 1% GDP growth, down from the prior 1.5% estimate, according to CNBC. If that 1% growth held, the economy would avoid a recession, at least this year. But there are many variables at play, including tariffs, which are set to roll out this week. Goldman Sachs said the tariff threats are having a negative impact on consumer confidence, inflation, and economic growth.

“Sharp recent deterioration in household and business confidence, and statements from White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of these policies,” the Goldman research wrote in the note, according to CNN. “Higher tariffs are likely to boost consumer crisis.”

Inflation expected to rise

While waning consumer confidence is not always a reliable indicator, Goldman Sachs economists wrote that they are “less dismissive of the recent decline because economic fundamentals are not as strong as in prior years,” reported CNN.

A major concern is inflation, which Goldman Sachs sees rising due in large part to tariffs. It now projects core inflation to rise to 3.5% in 2025, which would be up from the current core PCE inflation rate of 2.8%. The 3.5% rate would be up 0.5 percentage points from past estimates. Further, Goldman anticipates the unemployment rate to rise to 4.5%, which would be up from the current 4.1% and higher than previously expected.

“We continue to believe the risk from April 2 tariffs is greater than many market participants have previously assumed,” Goldman Sachs economists said, according to CNBC.

Perhaps a silver lining is that this projected malaise has prompted Goldman Sachs to increase its number of rate cuts from 2 to 3. The firm now sees 25-point cuts in July, September and November, which would bring rates down to 3.50% to 3.75%.

Also, economists see the economy improving after Q1. The aforementioned CNBC survey calls for GDP growth 1.4% in Q2, 1.6% in Q3, and 2% in Q4.

S&P 500 estimate lowered to 6,200

Finally, Goldmn Sachs lowered its projections for the S&P 500 in 2025 to 6,200, down from 6,500. That would be about 10% higher than the current level. The S&P 500 is at about 5,617 as of Monday, down 4% for the year. Goldman also reduced its forecast for S&P 500 earnings-per-share growth to 7% from 9%.

“The headwinds to equity valuations from a spike in uncertainty are typically relatively short lived,” Goldman Sachs Research Chief US Equity Strategist David Kostin stated in a recent report. “However, an outlook for slower growth suggests lower valuations on a more sustained basis.”

So, to answer the question posed in the headline: A recession looks unlikely, based on economist projections. But the odds are somewhat higher because of the uncertain impact of tariffs.