Uncertainty Rises Amidst Metal Tariffs and Stalling Trade Talks 

Yields climb following aluminum and steel tariff hikes. President Trump’s decision to double levies on steel and aluminum imports contributed to a Treasury sell-off today. Yields rose 3-4 bps across most of the curve, a sign that markets are fearful about sustained inflationary pressures. 10-year and 30-year yields closed at 4.44% and 4.97%, respectively, while the policy-sensitive 2-year yield is currently 3.94%. Weaker than expected US manufacturing data prevented a more significant climb in yields, and Chair Powell’s speech had little impact on price action.

U.S. manufacturing sector contracts again. While President Trump’s tariffs were enacted to prop up the manufacturing sector, the short-term impacts appear negative. The ISM Manufacturing index was 48.5 in May, the third straight month of contraction and the sharpest decline since November 2024. The ISM’s import and export measures dropped to 16-year and 5-year lows, respectively, a sign that tariffs directly contributed to the manufacturing slowdown. Susan Spence, chair of the ISM Manufacturing Business Survey Committee, said, “We still feel that the economy overall over a longer period of time is still in expansion… we are really hopeful that the tariff uncertainties can come to a conclusion, and that the purchasing managers that are working so hard to deal with this whiplash can focus on the normalness of what their job should be.”

White House says Trump and Xi will likely speak this week. Today, White House Press Secretary Leavitt said that Presidents Trump and Xi “will likely talk this week,” however a specific date wasn’t provided, and the Chinese embassy hasn’t commented on a potential meeting. A touchpoint between the two leaders is something the President has been calling for during recent months and seems ever-more pressing given cracks already emerging in the recently announced “trade truce” between the two nations. China has claimed the U.S. violated the terms of the agreement, while the U.S. says China isn’t moving quickly enough to lift export controls on rare earth metals. As progress stalls with China, things are moving similarly slowly with the E.U. European Commission spokesman Olof Gill said that if no mutually acceptable agreement is reached, “…existing and possible additional E.U. countermeasures will automatically take effect on July 14…”