Goldman Sachs said on Sunday that it expects a greater chance of a U.S. recession in the next 12 months, citing uncertainty over trade policy, softening consumer and business confidence and a lower growth baseline.

The investment bank also forecast higher 2025 inflation due to increased trade tariffs, flagging concerns over President Donald Trump’s plans for more aggressive reciprocal tariffs. 

Goldman Sachs now sees a 35% chance of a recession in the next 12 months, compared to prior expectations of 20%. 

“The upgrade from our previous 20% estimate reflects our lower growth baseline, the sharp recent deterioration in household and business confidence, and statements from the White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of their policies,” Goldman Sachs analysts wrote in a note. 

The investment bank hiked its U.S. tariff assumptions for the second time in a month, forecasting a U.S. tariff rate of 15% in 2025. 

Higher tariffs are expected to boost inflation, with Goldman Sachs forecasting core PCE inflation of 3.5% by end-2025, up substantially from current levels and well above the Federal Reserve’s 2% annual target. 

The investment bank also forecast 2025 gross domestic product growth of 1% in 2025, down from prior forecasts of 1.5%.

Goldman Sachs’ forecast comes amid growing concerns over a growth slowdown, amid pressure from Trump’s tariff policies and from stickier inflation. 

Trump is expected to announce a host of new tariffs on April 2, a date he has constantly touted as liberation day. Trump is expected to outline reciprocal tariffs against major U.S. trading partners, with recent reports showing that he could impose as much as 20% tariffs across the board.