Agency: High tariffs could trigger Fed's "recessionary" rate cut

China International Capital Corporation Research Report believes that considering two scenarios, one is the lack of substantive progress in the negotiations between the United States and its trading partners, and the effective tariff rate of the United States is still very high after 90 days. At this time, the income effect is dominant, and economic demand is weakening or prompting the Federal Reserve to cut interest rates from July. The cumulative rate reduction for the whole year may reach 100 basis points.
Another scenario is that the negotiations are successful, tariffs are reduced, and demand shocks are relatively mild under the guidance of substitution effects, but inflationary pressures are more persistent. The Federal Reserve may delay the pace of easing and cut interest rates only slightly once a year in December. For the market, although monetary easing came earlier in the first scenario, this "recessionary" rate cut reflects the deterioration of economic fundamentals, which will instead suppress risk assets. (Golden Ten)