It’s easy to get so caught up in the current increases and decreases of the Trump tariffs that we lose track of how big an increase even the reduced 10% global tariff that President Donald Trump announced on Wednesday, April 9, is from the pre-Trump rates. At the end of 2024, the average effective tariff rate for the United States was 2.2%, according to the World Trade Organization (WTO).
CPIS inflation cooled in March. The all-items or headline inflation rate fell by 0.1% in March from February. That was the first monthly decrease in nearly five years. The core Consumer Price Index, which excludes more volatile food and energy prices, increased by just 0.1% from February, the least in nine months, according to Bureau of Labor Statistics data on Thursday.
The slowdown in the all-items rate reflected a drop in prices for energy, used vehicles, hotel stays and airfares. The cost of motor vehicle insurance — a main source of inflation in recent years — also retreated. But, and this is an important caveat, the numbers were too early capture much of the effect of higher tariffs.
President Donald Trump has pledged tariffs on drugs exported to the United States. Besides the threat to supply chains that could disrupt the supply of drugs to U.S. consumers, the potential tariffs threaten a clash between drugmakers and insurers over who will pay the higher prices.
We started off the day with the stock and bond markets headed for another retreat on news that the European Union and China were both slapping higher tariffs on U.S. exports and the United States was raising tariffs on China to 125% We ended the day with a 10%–or better–rally as President Donald Trump paused last week’s Liberation Day tariffs for 90 days–and replaced them with a 10% across the board rate–for everyone but China.The 125% tariff rate for China would remain intact. So what’s it all mean? It’s too early for definitive conclusions but here are my initial thoughts.
Just in case you were getting bored with the lack of volatility in today’s market: On Wednesday afternoon, President Donald Trump announced he would raise the tariff charged on Chinese exports to the United States to 125%, effective immediately. And that he would pause for 90 days most of the tariffs he announced just last Wednesday on Liberation Day and instead implement a 10% global tariff. Here’s what President Trump wrote on social media
Two and half hours before the opening of the U.S. stock markets Wednesday morning, China announced its response to President Donald Trump’s hike of tariffs on all Chinese imports. China imposed a 50% retaliatory tariff on all U.S. goods, bringing the total counter-tariff to 84%.
The yield on the 10-year U.S. Treasury is up 13 basis points to 4.43% as of noon New York time today as bond prices fell on strong selling. That’s extraordinary–usually Treasuries rise in price and yields fall when fear stalks Wall Street–and cause for worry. Just a few days ago, the 10-year Treasury had traded below 4%. Yields on the 30-year bond rose significantly today as well, at one point on Wednesday topping 5%.
“The global safe-haven status is in question,” Priya Misra, a portfolio manager at JPMorgan Asset Management, told Bloomberg.
The European Union retaliated to President Donald Trump’s steel tariffs Wednesday, April 9, with tariffs of up to 25% on a broad list of U.S. products. This is old news, however-a belated response to tariffs President Trump imposed on EU exports of steel and aluminum last month. Still to come is another round of retaliatory tariffs in response to the 20% tariff imposed by Trump last week on all EU exports to the United States.
So much for this morning’s rally. And so much for an end to the selling. The Standard & Poor’s 500 closed down 1.57% and the NASDAQ Composite ended the day off 2.15%. The small cap Russell 2000 was lower by 2.73%. The CBOE S&P 500 Volatility Index, the VIX “fear index,” closed up 11.09% to a very high 52.20.
Stocks saw their biggest rally since November 2022. As of 10:30 a.m. New York time Tuesday morning, the Standard & Poor’s 500 was up 3.80%. The NASDAQ Composite was higher by 4.32%. The CBOE S&P 500 Volatile Index, the VIX “fear index” had dropped 19.6% to a still very elevated 37.6. So what has fueled today’s rally and the turn around from last week’s panic selling?
Today, April 7, President Donald Trump threatened additional 50% tariffs on China if it did not rescind its retaliatory trade measures–a 34% tariff, restrictions on exports of rare earth minerals and other measures, designed to match the 34% tariff President Trump announced on Chinese good last week
In a post on Truth Social Trump said the U.S. would impose even higher tariffs on China if Beijing did not back down. “If China does not withdraw its 34% increase above their already long term trading abuses by tomorrow, April 8th, 2025, the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9th,” the president posted on Truth Social. “Additionally, all talks with China concerning their requested meetings with us will be terminated!”
The futures contracts for the S&P 500 Index and the Nasdaq 100 Index each fell as much as 5% in the early Asian trading. U.S. equity futures plunged, putting the Standard & Poor’s 500 on track for a bear market as the Trump administration dug in on a trade war economists warn will tip the world’s largest economy into recession. Contracts on the S&P 500 Index plunged 3.6% at 6:27 p.m. Sunday in New York, after the underlying index had fallen 10% in the past two days. The rout in futures would leave the index on a pace to fall more than 20% from its February record. Nasdaq 100 Index futures sank 4.4%, after the tech-heavy gauge entered a bear market Friday. Russell 2000 futures lost almost 5%. A big reason for the rout in futures was the failure of the Trump officials speaking on the Sunday talk shows to say anything to demonstrate any re-thinking of the tariffs after the financial markets said, “Hell no” on Thursday and Friday.
