Stocks are in recovery mode after Trump announced a 90-day pause on tariffs and introduced a 10% universal tariff rate—excluding China. More importantly, there’s a temporary change to tariffs on electronics, including phones, chips, and computers, which are now down 20% on imports from China, not 145% as previously suggested.
It looks like Trump is stepping back a bit. A constant increase in tariffs simply won’t and can’t work, and it seems they are now aware of the significant market risks—especially if China is truly selling US bonds, which shouldn’t come as a surprise.
We’re seeing a sharp fall in bonds and higher US yields, yet the USD isn’t following that move. This time, yields are rising for a different reason. It’s not about what the Fed may do or inflation expectations; it’s about the potential response from China. If they are indeed selling bonds as a counter to US tariffs, it could escalate. China is one of the largest holders of US debt, and if they start reducing exposure, it could trigger panic. A bond sell-off would cause US interest rates to spike, doing far more damage to the economy, which is already showing signs of recession this year.
The real question over the next few weeks is: what will the Fed do? There are rumors that Powell could cut rates sooner, which may help stabilize the markets. When looking at stocks, it’s too early to say the bottom is in, but we could be getting close. What is more clear to me is that the dollar remains a sell after the retracement, and that commodity currencies may have more upside following last week’s reversals.
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Grega
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