Stock market today: S&P 500 in weekly loss as trade war fears intensifyy
Investing.com -- Goldman Sachs lowered its economic outlook for the United Kingdom and flagged more downside risks for the euro area’s growth following the new slate of tariffs introduced by the Trump administration.
The bank cut its UK growth forecast by 0.1 percentage points to 0.7% for the year 2025, reflecting the harsher-than-expected imposition of a 10% reciprocal tariff by the U.S.
Goldman Sachs maintained its inflation forecast for the UK, expecting the Bank of England to reduce interest rates to a lower terminal rate of 3%, down from the previously projected 3.25%.
“Weaker growth also complicates the fiscal outlook, and we continue to see a significant risk of tax increases at the Autumn Budget,” strategists led by Sven Jari Stehn said in a note.
The tariffs on the European Union, which include a 20% rate, aligned closely with Goldman Sachs’ assumptions that led to a recent downgrade of the euro area’s economic forecast.
The firm has not altered its euro area projections, which remain below consensus. However, it flagged additional downside risks to growth for the region due to a “slowing global economy, an escalation in trade tensions, and tighter financial conditions.”
The strategists also pointed to the possibility of a stronger euro and more aggressive tariffs on China and East Asia as factors that could negatively impact inflation. Thus, they expect the European Central Bank (ECB) to make three more rate cuts to 1.75% by July, with a reduction on April 17 now deemed “very likely.”
The Swiss economy is also expected to feel the impact of the tariffs, with a 31% tariff rate exceeding Goldman Sachs’ expectations. After accounting for exemptions, the effective tariff rate for Switzerland could rise by 11 percentage points.
As a result, Goldman Sachs has modestly decreased its growth forecast for Switzerland by 0.1 percentage points for both 2025 and 2026, to 0.8% and 1.2%, respectively. The strategists expect the Swiss National Bank to revert to a negative policy rate, forecasting two cuts to a terminal rate of -0.25% in September.
They also revised their forecasts for Norway and Sweden, incorporating the effects of tariffs on critical imports and the announced reciprocal tariffs.
While expecting slightly higher inflation in Sweden due to retaliation, strategists anticipate more negotiations and smaller inflation effects in Norway. They remain confident in the prediction of further monetary easing for both countries’ central banks beyond what is currently priced in.