America’s growth forecasts have been slashed amid fears that Donald Trump’s trade war will plunge the global economy into recession.
The US economy is now expected to grow by just 1.7pc this year, according to Goldman Sachs, down from a previous forecast of 2.4pc after the president unleashed a barrage of global tariffs.
The downgrade reflects a growing Wall Street backlash against the Trump administration, as stock markets tumbled on Monday in the wake of the president refusing to rule out a US recession.
The sell-off led to the tech-heavy Nasdaq sinking by as much as 5pc, while the S&P 500 fell by 4.6pc.
Morgan Stanley has since predicted that the S&P could drop by a further 5pc in the coming months if the president continues to ramp up his trade war.
Jan Hatzius, an economist at Goldman Sachs, said the bank cut its growth forecasts because Mr Trump’s tariffs were damaging the economy and considerably higher than expected.
“First, they [tariffs] raise consumer prices – and thereby cut real income,” he said.
“Second, tariffs tend to tighten financial conditions. Third, trade policy uncertainty leads firms to delay investment.”
America is now facing a 20pc chance of recession, Goldman Sachs predicts, as economists believe Mr Trump will water down tariffs once the scale of the economic threat becomes clear.
Without changes, JP Morgan warned that the US risks triggering a recession “in all corners of the world”, particularly if Mr Trump launches a trade war against Europe.
When asked about a US recession on Sunday, Mr Trump said: “I hate to predict things like that. There is a period of transition because what we’re doing is very big.”
Bruce Kasman, economist at the investment bank, said: “We see a materially higher risk (40pc) of a global recession this year due to extreme US policies.
“As US policies are starting to turn less business-friendly, the risk is that sentiment sours and this leads to a sharper pull-back in spending in all corners of the world.
“Even if a full-blown trade war is averted, the back-and-forth threats could still be sufficient to slow global growth.”
JP Morgan added that Mr Trump’s erratic policy announcements are draining confidence from US businesses, which are also suffering from the stock market volatility.
Analysts at BCA Research described a recession in the US as “imminent” as the country faces “a cascade of bad economic news”.
However, Howard Lutnick, Mr Trump’s commerce secretary, insisted: “There’s going to be no recession in America.”
In an interview to NBC News, he said: “Donald Trump is a winner. He’s going to win for the American people. That’s just the way it’s going to be.
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