Goldman Sachs has cautioned that extensive U.S. tariffs will have a negative impact on global economic growth, leading to the Federal Reserve potentially cutting interest rates more significantly than previously anticipated.

Ashish Shah, the chief investment officer of public investing at Goldman Sachs Asset Management, described the tariffs as a blow to U.S. consumers, causing a "growth shock." The bank's executives expressed concerns that the uncertain economic outlook is a result of U.S. trade policies likely provoking retaliatory actions from other countries.

Despite the desire among major investors to diversify their portfolios globally, they currently remain largely invested in U.S. assets. Marc Nachmann, the global head of asset and wealth management at Goldman Sachs, noted that while there is anxiety among investors, significant allocators are hesitant to make substantial changes.

GSAM, managing $2.8 trillion in public assets, plays a crucial role in Goldman's efforts to expand revenue beyond its traditional areas of investment banking and trading.

Following the announcement of the tariffs, there was a drop in equities value while Treasury bonds saw increased demand from investors seeking safe-haven assets. Lindsay Rosner, head of multi-asset fixed income at GSAM, observed the favorable performance of bonds that benefit from future expectations of interest rate decreases. She cautioned about the potential risks of heightened inflation and slowing growth, a troubling economic combination that recalls the stagflation of the 1970s.