The team, led by Jan Hatzius, raised its 12-month recession probability to 20% from 15% previously. The probability was only slightly increased because "the White House has the option to pull back if the downside risks begin to look more serious."

Meanwhile, Goldman Sachs has revised its baseline assumptions to assume higher tariffs going forward. It now sees higher odds that a small increase in tariffs can still be imposed on Canada and Mexico on a long-term basis.

If so, "there is little reason to believe that President Trump will decline to impose tariffs on other trading partners that do not have free trade agreements with the U.S., as Canada and Mexico do, and whose economies are not as integrated with U.S. production."