Global commodity prices are under severe pressure as trade tensions escalate between the United States and China, the world’s two largest economies, sparking heightened fears of a looming recession when global consumption seems to stagnate.
Trump’s decision to intensify tariffs on Chinese imports to 145% has introduced additional strain on global markets, especially given China’s position as the leading commodity consumer.
The S&P GSCI index, which captures global commodity movements across various sectors, has seen a decline of over 8% since the “Liberation Day” on April 2 despite a brief recovery following a recent tariff reversal.
Marko Papic, a macro and geopolitical analyst at BCA Research, described the dip in commodities as a signal that a worldwide economic recession might be approaching.
Goldman Sachs in the past week has made three revisions on its recession forecast. On Wednesday, the bank adjusted its recession probability for the third time after President Donald Trump declared a temporary halt on new tariffs for 90 days. This announcement prompted Goldman to lower its latest recession probability, which had been raised earlier the same day to 60%.
The bank’s economists now estimate a 45% chance of a recession occurring in the next year, aligning with previous predictions made last week.
Just about a week ago, Goldman Sachs increased its 12-month recession probability from 35% to 45%.
Diving deeper into specific sectors, energy commodities have suffered the most, with a 12% drop noted since early April, according to S&P Global’s energy index, while industrial metals have fallen approximately 9%. Soft commodities have not been spared either, reporting a 5.2% decrease.
The negative sentiment dragging down oil is compounded by OPEC+’s strategic decision to hasten production increases, even as oil prices continue to languish at multi-year lows.
Both Brent and West Texas Intermediate (WTI) benchmarks face downward revisions from Goldman Sachs, which predicts Brent at $62 and WTI at $58 per barrel by year-end.
The escalating downturn in commodities has intensified recession warnings in the U.S., with JPMorgan forecasting a 0.3% GDP contraction this year. ING’s commodity strategists interpreted the prolonged crude oil slump as an indication that the market is bracing for recessionary conditions.
Copper, a reliable economic barometer, has faced a significant decline despite a brief rally. Prices now hover at $8,380 per ton on the NYMEX, marking a 16% decrease since early April. With mounting pressures on China, the largest copper consumer, the outlook remains somber, noted Ewa Manthey, a commodities analyst at ING.
In response to a potential U.S. recession, Goldman Sachs revised its expectations for copper, citing excess supply and stagnant demand projections.
The investment bank warns that, should recessionary conditions worsen, copper prices could tumble to levels reminiscent of past economic challenges during Trump’s first presidency and the pandemic, speculating declines to $6,500 and $5,900 per ton, respectively.
