Goldman Sachs’ latest economic outlook predicts global GDP growth of 2.7 per cent in 2025, with the US leading developed markets in performance.
Namely, US gross domestic product (GDP) is projected to increase 2.5 per cent in 2025, well ahead of the consensus at 1.9 per cent, while the euro area economy is expected to expand by just 0.8 per cent.
According to the wealth management firm, US expansion will be fuelled by expected tax cuts, regulatory reforms, and a marked acceleration in labour productivity. Goldman Sachs’ noted that the US has already shown a stronger-than-expected growth trajectory, which is expected to continue for the third consecutive year.
While trade tensions, especially with China, pose risks, the firm said the overall economic impact is expected to be contained.
Goldman Sachs projects that any tariffs would have a small drag on US GDP, potentially lowering growth by 0.2 per cent next year. In fact, it noted that while the US may still face inflationary pressures from higher tariffs, the overall outlook remains optimistic due to falling inflation rates and easing financial conditions.
“The biggest risk is a large across-the-board tariff, which would likely hit growth hard,” said Jan Hatzius, Goldman Sachs head of global investment research and chief economist.
“Assuming that the trade war does not escalate further, we expect the positive impulses from tax cuts, a friendlier regulatory environment, and improved ‘animal spirits’ among businesses to dominate in 2026,” Hatzius added.
The economist expects the effects of these trade policies to be more pronounced in other economies, particularly in the eurozone and China.
Namely, Goldman Sachs has already revised down its growth forecast for the euro area, citing the ripple effects of trade policy uncertainty and tariffs, which could reduce its GDP by nearly 1 per cent if trade policy uncertainties rise to peak levels of trade conflict seen in 2018–19.
“Our economists reduced their growth forecast for the euro area in 2025 following the US election results by 0.5 percentage points [fourth quarter over fourth quarter] and would likely cut it further if the US imposes an across-the-board tariff,” the wealth firm said.
China, the world’s second-largest economy, is also expected to grow more slowly at 4.5 per cent, as it grapples with the impact of higher tariffs on exports.
Likewise, other countries are also expected to be buffeted by US trade policy, according to Goldman Sachs Research, with larger drags predicted to occur in more trade-exposed economies.
However, Hatzius said: “Barring a broader trade war, policy changes in the second Trump administration are unlikely to change the broad contours of our global economic views.”
Additionally, the wealth management firm noted that the global outlook is buoyed by a dramatic decline in inflation over the past two years, supporting real income growth and easing the pressure on central banks to keep interest rates high.
With inflation cooling, Goldman Sachs Research expects the US Federal Reserve to cut its policy rate to 3.25–3.5 per cent with sequential cuts through the first quarter and a slowdown thereafter.
The European Central Bank, meanwhile, is expected to lower its policy rate to a terminal rate of 1.75 per cent.
“Our economists find that there’s also significant room for policy easing in emerging markets,” it said.
