Trump folded on tariffs ‘under market pressure’ from bonds, Capital Economics says President Trump

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Trump folded on tariffs ‘under market pressure’ from bonds, Capital Economics says

President Trump folded on his tariff policy Wednesday “under market pressure” and the bond market in particular, according to Capital Economics chief North America economist Paul Ashworth.

Trump resisted the stock market decline, but “once the bond market began to weaken too, it was only a matter of time before he folded on his eye-wateringly high tariffs,” the Toronto-based economist wrote to clients Wednesday.

“Our working assumption now will be that, cowed by the market response, Trump will repeatedly extend the ‘pause,’ meaning that this will end up looking a lot like the 10% universal tariff that he campaigned on,” the note said. Neither the U.S. nor China are likely to back down in coming days, and a full rollback to the level of tariffs before Inauguration Day is unlikely, although talks between the two nations will happen. Ashworth, who began at the London-based researcher in 2001, thinks the effective tariff rate on China is likely to settle at about 60%.

Partly as a result, and even allowing for deflation effect from lower oil prices, “we assume U.S. inflation will now peak at 4% or so,” Capital Economics wrote, or double the Federal Reserve’s 2% target. “U.S. GDP growth should be 1.0% to 1.5% annualized over the next 4 quarters.”

— Scott Schnipper

 

https://www.cnbc.com/2025/04/09/stock-market-today-live-updates.html