12 June 2025 | 9:22AM EDT US Daily: A Slightly Smaller Tariff Effect (Mericle) Jan Hatzius +1(212)902-0394 | jan.hatzius@gs.com Goldman Sachs & Co. LLC Alec Phillips +1(202)637-3746 | alec.phillips@gs.com Goldman Sachs & Co. LLC David Mericle +1(212)357-2619 | david.mericle@gs.com Goldman Sachs & Co. LLC Ronnie Walker +1(917)343-4543 | ronnie.walker@gs.com Goldman Sachs & Co. LLC Manuel Abecasis +1(212)902-8357 | manuel.abecasis@gs.com Goldman Sachs & Co. LLC Elsie Peng +1(212)357-3137 | elsie.peng@gs.com G ...

Investment Rating - The report raises the 2025 growth forecast by 0.5 percentage points to 1% Q4/Q4 and lowers the 12-month recession odds to 35% from 45% previously [11][14][15]. Core Insights - The US and China have agreed to a 90-day pause in retaliatory tariffs, resulting in a net increase of +30 percentage points for US tariffs on China and +15 percentage points for China's tariffs on the US by 2025 [4][6]. - The effective US tariff rate is expected to increase by +13 percentage points in 2025, slightly lower than the previous assumption of +15 percentage points, due to anticipated sectoral tariffs on pharmaceuticals and semiconductors [6][10]. - The report indicates a smaller increase in consumer prices, leading to a reduced tax-like impact on real disposable income and firmer consumption growth [10][11]. Summary by Sections Economic Forecast - The report anticipates a peak hit to year-over-year GDP growth from tariffs of 1.4 percentage points, down from 1.8 percentage points previously [11]. - The unemployment rate is projected to rise to 4.5% in December 2025, a slight decrease from the previous forecast of 4.7% [11]. Federal Reserve Policy - The rationale for Federal Reserve rate cuts has shifted from insurance to normalization, with expectations for three 25 basis point cuts starting in December 2025, rather than sequentially from July [17][19][20]. - The terminal rate range remains unchanged at 3.5% to 3.75% [19]. Tariff Policy Implications - The report suggests that the lower US tariff rates on China may influence reciprocal tariff rates on other trading partners, indicating a potential for lower rates overall [5][6]. - The ongoing dialogue between the US and China on economic and trade relations is expected to contribute to a rebalancing of trade [4].

Cross Asset Research 13 April 2025 Global Portfolio Manager's Digest Whirlwind We provide context and perspective on research across regions and asset classes, this week highlighting our assessment of implied recession probabilities across asset classes; potential tariff impacts on China's economy & CNY; and the current state of the US energy trade. This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports ...