A recent Goldman Sachs report indicates that while the U.S. economy is currently performing adequately, it still faces significant challenges, particularly from trade tariff policies. Goldman Sachs analyst Rikin Shah noted that although advance consumer purchases might boost consumption data for March and April, the weak hiring market could become a crucial variable in the employment sector, and unemployment claims data may no longer accurately indicate market trends as they did in the past.
Goldman Sachs warns that despite the current strength of hard data in the U.S. and no immediate distress signals in the labor market, the true negative economic impact may not materialize until May or June. Especially under the continued effects of tariff policies, the U.S. economy remains in a highly uncertain state. The reason, according to Goldman Sachs, is that American businesses and consumers will act as "price takers" of high tariffs, and if there is a lack of short-term flexibility in the supply chain or consumption, the dollar might face devaluation pressure.
The report also points out that policy uncertainty and low confidence among consumers and businesses mean there is still a 45% chance of a U.S. recession in the next 12 months. Although the Federal Reserve has yet to make a positive response recently, Goldman Sachs believes that if the labor market deteriorates, the Fed may quickly cut interest rates by more than 200 basis points, with a policy reversal expected in late 2026 and 2027.
Goldman Sachs specifically noted that the structural devaluation of the dollar has become a significant trend. In recent years, a large influx of private capital into U.S. assets has bolstered the dollar's strength, but this trend might reverse. Once non-U.S. investors begin to reduce their holdings of U.S. assets, the pressure for dollar devaluation will significantly increase, especially in the context of a massive U.S. deficit.
Additionally, Goldman Sachs Chief Economist Jan Hatzius also warns that the dollar remains overvalued, and historical data show that the dollar experienced devaluation of 25%-30% in the 1980s and early 21st century. With non-U.S. investors holding a high proportion of U.S. assets, the dollar may face greater devaluation pressure in the future, particularly if international capital starts exiting the U.S.
In summary, Goldman Sachs believes that although the U.S. economy has resilience in the short term, medium- to long-term uncertainty will continue to increase, especially regarding tariffs and international trade situations, which are expected to have a profound impact on the dollar and the U.S. economy.
