No more Trump ‘tailwind’: Goldman now sees recession risk

What a difference one quarter can make.

In January, Goldman Sachs CEO David Solomon had high hopes for business under the second Donald Trump administration. The change in government, Solomon said at the time, seemed to augur a positive shift in CEO sentiment, an “improving regulatory backdrop” and, in general, a “tailwind” for Goldman’s mix of businesses.

Three months later, he was singing a different tune.

“We are entering the second quarter with a markedly different operating environment than earlier this year,” Solomon said Monday on a conference call unveiling Goldman’s first quarter earnings. “Our economists’ expectation for growth in the U.S. has fallen meaningfully, from over 2% to 0.5%. The prospect of a recession has increased, with growing indications that economic activity is slowing down around the world.”

The primary cause of the turnaround, the CEO said, is the trade policies of the same administration that once gave him such cause for optimism.

Since taking office, President Trump has imposed across-the-board tariffs on almost 90 countries, as well as a 25% levy on foreign cars and a 145% duty on most goods from China. At various points, the president has paused or made exemptions to these tariffs, which has lessened the pressure on certain prices but increased the overall unpredictability of his policy.

This confusion, Solomon said, is taking a toll on Goldman’s customers.

“Our clients, including corporate CEOs and institutional investors, are concerned by the significant near-term and longer-term uncertainty that has constrained their ability to make important decisions,” Solomon said. “This uncertainty around the path forward and fears over the potentially escalating effects of the trade war have created material risk to the U.S. and global economy.”

Not that any of this has stopped Goldman from growing its profits. In the first quarter of 2025, net income at the New York-based bank was $4.74 billion, a 15% jump from the same quarter last year.

Earnings blew past Wall Street’s expectations. Revenue totaled $15.1 billion, above analysts’ average estimate of $14.7 billion, and earnings per share were $14.12, beating estimates of $12.27, per S&P.

It was the third highest-revenue quarter in Goldman’s history, the bank said. Goldman attributed the strong top-line results partly to growth in its global banking unit, which took in $10.7 billion, 10% more than in the first quarter of 2024. In particular, equities garnered record revenues of $4.2 billion, a 27% jump from the prior year.

During the call on Monday, Solomon said Goldman may even have benefited to some extent from the nervous business environment. During times of uncertainty, he said, clients “turn to Goldman Sachs” for guidance.

“We obviously saw significant moves in equity markets as people positioned for a different kind of trade policy during March … which actually led to higher activity for us in a variety of ways,” Solomon said. “We’re early in the quarter, but so far the business is performing very well and clients are very active.”

Not every business unit thrived during the first quarter. Platform Solutions, which includes what remains of Goldman’s ill-fated foray into consumer banking, took in $676 billion, a 3% drop from the year-ago period. Within the unit, consumer platforms fell 1%, and transactional banking plunged 19%.

Even so, some analysts considered the Platform Solutions results an asterisk on Goldman’s otherwise positive story. Saul Martinez, head of U.S. research at HSBC, said the unit “delivered better than expected earnings.” Glenn Schorr, senior managing director at Evercore ISI, expressed a similar sense of proportion.

“While small, Platform Solutions continues to be a thorn in the side,” Schorr wrote in a research note. “We’ll point this out but we don’t think it’s much more than taking a full comp accrual on a monster revenue quarter.”

While emphasizing the costs of the new trade war, Solomon left the door open for the Trump administration to change course.

“We are encouraged by the administration’s recent actions to pursue a more gradual policy process that allows for considered negotiations with many countries,” he said. “But how policies will evolve is still unknown.”