Despite bold claims from the US administration that Americans should ignore the decline in equities and spike in yields, it is evident that they faced a great deal of pressure to walk back the tariffs.
This afternoon, President Trump announced a 90-day Reciprocal Reprieve on all countries except China. He explained that many countries were begging to negotiate a new trade deal as the rationale behind his decision. Our guess is that the penguins drove a hard bargain.
The tariff two-step.
- Reciprocal tariffs suspended until July 8th for 75 countries.
- 10% tariff is the new zero for all trading partners, ex Canada, Mexico, & China.
- Baseline tariffs on China 125%.
The Market reaction.
- Equities closed + 8-12%
- Canada & US 2y yields 15 – 20 bps higher.
- US 10y rates, which rocketed higher, have stabilized.
- The market has moved to priced in one cut from the BoC and three from the Fed this year.
