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The chief executive of Goldman Sachs, David Solomon, has warned that the chances of a US recession have “increased” in the wake of Donald Trump’s tariffs and that an escalating trade war poses “material risks” for US and global growth.
The Wall Street boss said the growing uncertainty over the fallout of US tariffs could spell trouble for companies and consumers and wreak havoc on the economy.
“We are entering the second quarter with a markedly different operating environment than earlier this year,” he told analysts during an earnings call.
“The prospect of a recession has increased, with growing indications that economic activity is slowing down around the world.”
The growing uncertainty had made it hard for Goldman clients to make important business decisions, he added. “This uncertainty around the path forward, and fears over the potentially escalating effects of a trade war, have created material risks to the US and global economy.”
Solomon’s warning came despite a temporary roll-back by Trump, who declared a 90-day pause on higher-band tariffs for countries outside China last week. The US president also announced plans to exclude some electronic products from steep reciprocal tariffs on Chinese goods.
Solomon said he was “encouraged by the US administration’s recent actions to pursue a more gradual policy process that allows for considered negotiations with many countries” but warned markets would continue to be volatile given that “how policy will evolve is still unknown”.
The banking boss tried to strike a diplomatic tone, saying that the “administration’s focus on trade barriers and strengthening the US competitive position is commendable”. However, he noted the US has been a beneficiary of global trade arrangements. “Few … benefited more from the post-second world war economic and financial order than the United States.”
“This doesn’t mean meaningful reform in certain areas is not warranted,” Solomon added.
His comments came as Goldman Sachs reported its best-ever quarter for equities trading, as the bank benefited from market turmoil triggered by Trump’s return to the Oval Office.
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The Wall Street bank reported record revenues from its equity division in its first quarter, from January to the end of March, rising 27% compared with a year earlier to $4.2bn (£3.2bn). It helped push pre-tax profits up 8% in the first quarter to $5.6bn, a period that did not include the turmoil of Trump’s tariffs.
But prolonged volatility and uncertainty over the tariff fallout could dampen appetite for loans and deal-making, and delay stock market listings, in moves that could ultimately hit revenues for banks such as Goldman Sachs.
“So far, the business is performing very well and clients are very active,” Solomon said. “My guess is, over time, this level of uncertainty will come down.”
