
After a statement from the White House, both the U.S. dollar and bond yields experienced a noticeable increase.
Current Developments on Tariffs
As we head into the weekend, the topic of tariffs is heating up.
Initially, we heard that tariff duties were delayed for a month, but the White House press secretary has since confirmed they will actually kick in tomorrow.
So, what’s really going on?
Since November 7, 2024, I’ve cautioned us to brace for sensational headlines, but it’s important to keep a level head.
It’s looking less likely that President Trump will roll out sweeping tariffs during his presidency.
Instead, he seems focused on negotiating favorable deals with other countries.
While tariffs could serve as a bargaining chip, it’s probable these moves would be temporary tactics rather than a long-term strategy.
Recent analysis from the Tax Foundation sheds light on the potential fallout of proposed tariffs: implementing 25% tariffs on Canada and Mexico and 10% on China could:
- Create an additional $1.2 trillion tax burden from 2025 to 2034
- Contract GDP by 0.4%
- Result in the loss of 344,000 jobs
- Raise taxes by an average of $830 per U.S. household in 2025
Implications of Tariffs
With such serious consequences on the horizon, it’s hard to believe Trump would push for substantial tariffs against major trading partners.
Earlier today, Sarah and I discussed this on the HousingWire Daily podcast before the White House made its announcement.
My skepticism about a universal tariff approach is simple: if tariffs were meant to be effective economic tools, they would be executed swiftly and maintained long-term to create real change.
Instead, it feels more like a strategic negotiation aimed at fostering dialogue, securing exemptions, and striking better deals.
Tariffs provoke reactions from other nations, often escalating into trade conflicts that nobody wins.
This ongoing situation can also shake up global currency markets, particularly impacting smaller economies.
News of potential tariffs has already strengthened the U.S. dollar—something the president likely wishes to avoid as a strong dollar makes exporting goods harder.
Market Reactions and Economic Outlook
Let’s not forget that during 2018 and 2019, job data saw significant negative revisions alongside sluggish business investments, with the stock market dipping nearly 20% in late 2018.
Despite the looming tariff announcement, the bond market remained relatively stable, with the yield on the 10-year Treasury bond inching up from 4.51% to 4.57%, still below the yearly peak of 4.81%.
I know the fast-paced nature of these headlines can be dizzying; the narrative shifts rapidly.
It’s vital to remember the U.S. population exceeds 336 million, with nearly half in the workforce and all of them consuming in some form—think about infants whose needs are met by parents.
In a consumption-driven economy, this is a critical factor to consider when weighing the implications of tariffs, especially amid a strong dollar.
Source: Housingwire