The breaking of the ice on Sino-US tariffs, Goldman Sachs expects the first rate cut by the Federal Reserve to be delayed until December.

After high-level economic and trade talks between China and the United States in Geneva, Switzerland, a positive consensus was reached, and it was announced that bilateral tariffs would be significantly reduced. Goldman Sachs commented on the latest developments: "Given recent developments and the significant loosening of financial conditions over the past month, we are raising our economic growth forecast for 2025 by 0.5 percentage points to 1% year-on-year in the fourth quarter, and lowering the probability of an economic recession in the next 12 months to 35%." Goldman Sachs now expects the Federal Reserve to cut interest rates for the first time in December (instead of the previously predicted July), and has lowered the peak path for core PCE inflation to 3.6% (down from 3.8%). Previously, Goldman Sachs believed that the significant reduction in US tariffs on China would have a limited impact on the overall effective tariff rate for the United States. The bank believes that "easing tariffs on China will only result in a slight decrease in the current effective tariff rate for the United States (less than 2 percentage points)." Even with this decrease, the overall tariff level for the United States will still be significantly higher than and cover a much larger scope than market expectations at the beginning of the year. While the ceasefire in the tariff war is good news (signalling a retreat by the Trump administration from the edge of causing economic disasters at home and abroad), current tariffs are still at their highest level since World War II.