Trump Blinks On Tariffs

Here’s How 3 Asset Classes Might Move Now

There’s been a definite change in tone from the White House over the past few weeks.

After launching an ultra-aggressive tariff policy whose goal was to pound trade partners into submission, it appears now that Trump is beginning to understand some of the consequences of this approach.

Following the sweeping tariffs announced on Liberation Day, long-term Treasury yields began rising as China and Japan started dumping their Treasury holdings. Trump’s attempts to drive interest rates lower by force was backfiring and he announced a 90-day pause on most duties just days later.

Long-term yields have come down off of their recent highs, but they have yet to replicate the risk-off pulse that had been occurring from late April into early May. We’ve seen by the damage done to U.S. stocks and the dollar that investors no longer have the affinity for U.S. assets that they once did. That could keep yields elevated and the dollar suppressed for a while longer.

Earlier this week, Trump announced that China tariffs would “come down substantially”. What was the trigger? Maybe it’s the stock market correction (he always pays attention to U.S. stocks regardless of what he says now and has often used it as a benchmark for success). Maybe it was sinking sentiment readings. Maybe it was seeing his approval ratings drop. Maybe he started listening to his inner circle. Could be any or all of these reasons.

Without any imminent trade deals in place (or possibly even on the horizon), Trump seems to have decided that he’s pushed hard enough for the time being with more downside than upside for the time being. Stocks liked the news though and have been climbing throughout the week.