Goldman Sachs raises its 12-month U.S. recession risk to 35% from 20%
Welcome to Talking Business, a podcast produced in Melbourne Australia.
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I am Leon Gettler. My job is to review and monitor the week’s news in business, finance and economics. I bring it all to you, every week.
This is episode number 9 in our series for 2025 and today’s date is Friday April 4
First, I’ll be talking to I’ll be talking to Greg Zakowicz, senior ecommerce marketing expert at Omnisend. He’ll provide all businesses with great marketing tips in the lead up to Easter which is the biggest sales event for this time of the year.
And I’ll be talking to Rabobank economist Michael Every about the impact of Trump’s tariffs on China and how these will affect the global economy.
But first, let’s talk to Greg Zakowicz
So what’s happening in the news?
A study from Aston University in the UK has found that a trade war triggered by President Donald Trump applying a 25% tariff on all imports could cause a $1.4tn hit to the world economy and dramatically drive up US prices. In a full-blown global trade war, where partners retaliate to match Trump tariffs, the US would experience the worst inflationary effects of any nation, according to the research. It would send US inflation up to 5.5%, higher than any other nation. Jun Du, a professor of economics at Aston University, said the modelling showed that if countries imposed tariffs of 25% on each other it would have similar effects to the 1930 trade war that deepened the Great Depression. “These findings align with historical precedents like the Smoot-Hawley tariffs and modern trade conflicts, illustrating how protectionism erodes competitiveness, disrupts supply chains, and imposes disproportionate costs on consumers,” she wrote. In the hypothetical scenario where the war is confined to Canada, Mexico and China responding with a 25% tariff against Trump-imposed tariffs, all sides experience a sharp drop in trade of more than 30%. “The study reaffirms that no economy emerges unscathed from systemic tariff escalations, as retaliatory spirals fracture multilateral co-operation and amplify global instability,” Du said.
Concerns are growing about Trump’s tariffs with Goldman Sachs raising the probability of a U.S. recession to 35% from 20%. The brokerage also lowered the world’s largest economy’s GDP growth forecast for 2025 to 1.5% from 2.0% and projected three interest rate cuts each from the U.S. Fed and the European Central Bank from its previous expectation of two each.as President Donald Trump’s tariffs roil the global economy and upend financial markets. Europe is expected to fare worse than the U.S., Goldman warned, as it projected the region’s economy could enter into a “technical” recession this year. The brokerage forecasts “little” growth for the rest of 2025, with non-annualised growth of 0.1%, 0.0% and 0.2% in the second, third and fourth quarter, respectively. Goldman Sachs expects Trump to implement a reciprocal tariff on the European Union amounting to 15 percentage points, raising the total effective tariff rate by 20 percentage points. “We estimate that our new tariff assumptions will lower euro area real GDP by an additional 0.25% compared to our previous baseline, for a total hit to the level of GDP of 0.7% compared to a no-tariff counterfactual by end-2026,” Goldman said in a separate note on Sunday. However, in a more “downside” scenario of tariffs, Goldman sees a total hit of 1.2% to the EU economy which could push the euro area into a technical recession in 2025, compared with a no-tariff scenario.
For sure, eyes were on the Reserve Bank Board meeting this week but of course, the RBA as expected kept rates on hold – there was no April Fool’s Day cut — so instead the eyes of business and the market will on Trump’s tariffs which will be announced on Wednesday (US time), For what it’s worth, Trump calls it “Liberation Day” and it will be the biggest round of tariffs yet. We already know that Australian steel and aluminium producers have already been hit by 25% tariffs, but so-called reciprocal levies could impact all export industries. That’s particularly if Trump follows through on his threat to treat Australia’s 10% goods and services tax as a trade impediment.
And Australia is tipped to incur a new round of American tariffs on exports, including $7 billion in farm produce, after the federal government rebuffed demands from US President Donald Trump to overhaul pharmaceutical subsidies and weaken biosecurity rules. Farmers have been told to expect tariffs of 10% or more on beef and other products after talks with the Trump administration reached an impasse. Anthony Albanese ruled out a deal with Trump to adjust domestic policy in response to the US complaints, which include claims that American exporters cannot ship food to Australia due to biosecurity checks on pork and other products. “Not on my watch – on my watch, our biosecurity system is essential,” Albanese said.
And the Reserve Bank of Australia has warned that uncertainty about the outlook abroad remains significant. In its announcement on the RBA’s decision to keep rates on hold, the RBA said: “On the macroeconomic policy front, recent announcements from the United States on tariffs are having an impact on confidence globally and this would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures. Geopolitical uncertainties are also pronounced. These developments are expected to have an adverse effect on global activity, particularly if households and firms delay expenditures pending greater clarity on the outlook. Inflation, however, could move in either direction. Many central banks have eased monetary policy since the start of the year, but they have become increasingly attentive to the evolving risks from recent global policy developments.” In her press conference following the decision, RBA governor Michele Bullock said tariffs would slow global trade and that would have implications for Australia. “Australia, as a small open economy, has benefited massively from open trade, so it’s not good for us. A world trading system that is fragmenting, that’s not good for us,” the RBA governor said in her press conference. The immediate impacts in terms of fragmentation, stopping of trade, increasing in price levels, they’ll all be felt. But the issue of longer-run impacts, that is going to be quite dramatic.” Keeping the cash rate on hold was a consensus decision by the board, Ms Bullock said. The impact on Australia’s inflation at this stage was “less clear”, she added, but all things being equal tariffs meant higher prices.
And Beijing’s top local diplomat has urged Australia to work closely with China in defiance of US President Donald Trump’s tariff war. China’s ambassador to Australia Xiao Qian said China and Australia were beneficiaries of free trade and should work together with the international community to support globalisation, uphold the international trading system and promote trade liberalisation. “The United States imposition of tariffs on multiple countries, including China and Australia, seriously tramples the international free trade system centred on the World Trade Organisaiton,” Xiao said.
In a stinging report, the Australian Securities and Investments Commission found that super funds trend to be out a fraction of death claims. ASIC found 78% of claims reviewed had delays caused by processing issues within the trustee’s control. For instance, the $93bn industry superannuation fund Rest paid out just 8% of death claims for a deceased member within 90 days. Public sector fund Commonwealth Superannuation Corporation had a 10% completion rate at the 90-day mark, followed by Brighter Super on 20%, HESTA at 21% and Hostplus at 22%. UniSuper outperformed other industry funds, ranking second out of the 10 with 41% of its beneficiary claims ruled off after 90 days. Retail funds NM Super (representing AMP) and Nulis (MLC Super) were third and fourth, followed by Australian Retirement Trust. ASIC found industry funds were the worst offenders in delaying payouts after it examined two years’ worth of claims.
And in bad news for the Australian economy, commodity exports are expected to fall almost 7% this year. The latest quarterly figures from the Department of Industry, Science and Resources highlight the impact of slowing commodity prices and increased global market supply on Australia’s mining sector. The March Resources and Energy quarterly report found that Australian resource and energy commodity exports are expected to fall from $415 billion to $387 billion this financial year and to $343 billion in the next five years. The report also found that the price of iron ore, Australia’s biggest export commodity, is expected to average $US86 ($A137) per tonne this financial year, done from $US103 last year.
In an important piece of news which is likely to transform the media in Australia, Domain’s board has approved Costar Group’s offer to acquire 100% of the real estate platform company, subject to due diligence, after the US group increased its offer. The US-based Costar has a market cap of over A$50 billion (US$32.11b) and runs homes.com and apartments.com – two of the top listings sites in America. As part of the deal, and as a condition of the proposal, each of Domain’s directors, include those from Nine Entertainment, must “unanimously recommend Domain shareholders vote … in favour of the scheme of arrangement in relation to the transaction in the absence of a superior proposal and subject to an independent expert concluding, and continuing to conclude, that the transaction is in the best interests of Domain shareholders.” The deal requires approval from the Foreign Investment Review Board. As a 60% shareholder in Domain, Nine Entertainment stands to clear $1.4 billion if the sale goes ahead. This will allow it to clear its $628.5 million debt. The question then is what happens to newspapers like The Age, the SMH and Australian Financial Review. Domain provides 29% of Nine’s earnings, the biggest contributor after television. With the financial windfall after clearing its debt, Nine might choose to reinvest in its media assets including its newspapers. Or it might explore new opportunities in digital and streaming platforms and shift its focus away from traditional print media. One suggestion is already coming from MST Marquee analyst Fraser McLeish who named outdoor firm oOhmedia as a potential target. And Rupert Murdoch’s property listing empire REA Group, which is not part of News Corp, faces a brutal shake-up of its lucrative business if CoStar does end up buying Domain. REA Group is significantly larger than Domain Group in terms of company size and market presence. REA Group has over 2800 employees across three continents. whereas Domain Group has around 750 employees. Additionally, REA Group has a market capitalization of $30.72 billion. That’s makes it more than 10 times the size of Domain which has a market cap of $2.76 billion. REA Group also operates internationally, with investments in multiple countries, while Domain Group primarily focuses on the Australian market. REA’s domination is so overwhelming that analysts at Morningstar suggest increased competition from CoStar would allow REA to increase prices even further without regulatory scrutiny.
Telstra chief executive Vicki Brady has warned women could miss out on the AI revolution because they are often not as keen as men to take a risk and move into new areas, underscoring the risk of a new gender gap forming. Ms Brady said diversity and flexible work were fundamental to Telstra’s operations. So was part-time work: six out of 10 part-timers at the telco were women. And Macquarie CEO Shemara Wikramanayake says diversity is “good for business” despite it now being “woke to be anti-woke”. Meanwhile, former PayPal chair and veteran company director Bonnie Boezeman has called for more women to take up golf to help smash the glass ceiling and male-dominated leadership. Ms Boezeman – a founding member of Chief Executive Women 40 years ago and who now is a director at the Australian Golf Foundation – told the 1300 guests at Chief Executive Women anniversary dinner in Sydney that she wanted women to “pick up the game of golf” and challenge what had long been the domain of men in business. Boezeman, who funds a scholarship program to help school-age girls play golf, said: “I wanted them to have this skill to be on the same footing as men.” But artificial intelligence is threatening to derail the chances of women being on par with men, even before they step on a golf course. Women in Digital founder and CEO Holly Hunt said women were in general more cautious about using AI than men. “Women are quite anxious about using it correctly. In my research, women are 16% less likely than men to use AI tools, and I think that speaks to risk aversion and wanting to make sure that it’s being correctly applied,” Ms Hunt said. Ms Wikramanayake defended Macquarie’s diversity policies, saying: “We don’t do diversity because it’s woke, we do diversity because it’s good business … We live in a world nowhere it’s woke to be anti-woke.” She said one of the big issues in ensuring diversity at Macquarie was that only 35% of applicants were female. Girls and women were opting out because they were not attracted to jobs in finance and did not have many strong female role models in the sector. The bank lost more female talent as women began having families and at the senior levels, only about 10% of jobs were held by women.
And that’s it for this week.
I’ll be taking a break next week.
And in the week for April 18 (yes Good Friday), I’ll be talking to Professor Sven Rogge from UNSW Science on The Pact for Impact, an initiative that strengthens partnerships between academics, industry, and the broader community by measuring the real-world impact of scientific research and development.
And I’ll be talking to EY Regional chief economist Cherelle Murphy about the spending promises and patterns for the government in its budget and the Opposition’s promises in terms of fiscal restraint and what the economy needs.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com
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Looking forward to the episode of Talking Business on April 18 for your Easter enjoyment.
