April 3 - UBS Group (UBS, Financial) now projects that the Fed will reduce rates by 75 to 100 basis points over the remainder of 2025.
The firm highlighted that newly imposed U.S. tariffs, set under the International Emergency Economic Powers Act, establish a 10% base on most imports with higher reciprocal rates for select trading partners. Tariffs will impact goods from China at 34%, the EU at 20%, Japan at 24% and Switzerland at 31%, while exempting USMCA-compliant products, semiconductors, pharmaceuticals and energy.
UBS strategist Mark Haefele warned that these measures could elevate the effective tariff rate from nine to roughly 25 percent, the highest since World War II, potentially dragging near-term growth to about or below one percent. In his base scenario, tariff negotiations may ease pressures over time. However, a prolonged tariff regime could deepen economic slowdown and force even steeper Fed cuts, with a 30 percent probability of recession scenarios.
