Tariffs remain the top perceived policy risk from the Trump administration

Goldman Sachs have taken another survey of Investor Expectations for the second Trump term. In summary:

• Tariffs:
  Investors now assign high odds to various tariffs: reciprocal tariffs (65%), autos (59%), EU imports (57%), critical goods (54%), and Canada/Mexico (47%).
  Average expected increase in effective tariff rate is now 8.6 percentage points (vs. 3pp in November); Goldman forecasts a 10pp rise.

• Immigration:
  Investors expect annual immigration to decline to 700,000, slightly above Goldman’s revised 500,000 estimate.
  Most anticipate at least 10% of undocumented workers will exit the labour force or leave the U.S.

• Fiscal Policy:
  Forecasts include $100B/year in tax cuts and $150B/year in spending cuts, with a neutral net impact on the deficit expected.

• Macroeconomic Outlook:
  Since Inauguration Day, investors have lowered 2025 GDP growth expectations by 0.6pp and raised core PCE inflation forecasts by 0.2pp.
  Tariffs remain the top perceived policy risk.