Russia Tariff Threats Headline Ahead of CPI Tomorrow

Yields rise slightly following a slew of tariff developments. Treasury yields closed 1-3 bps higher today, with 2-year and 10-year yields now at 3.90% and 4.43%, respectively. The rise came after President Trump announced new trade levies against the EU and Mexico over the weekend in addition to new potential measures against Russia today. Markets are now looking ahead to tomorrow’s CPI data, which is expected to show accelerated inflation from May to June.

Trump threatens Russia tariffs. President Trump turned to tariff threats today in an attempt to fuel peace negotiations between Russia and Ukraine. He specified that the U.S. is “going to be doing very severe tariffs if we don’t have a deal in 50 days, tariffs at about 100%,” which would come in the form of secondary tariffs. Commerce Secretary Howard Lutnick stated later that sanctions and tariffs were “both tools in his toolbox” and that “you can do either one.” Separately, President Trump said that the U.S. will send “top of the line” weapons to Ukraine, marking a significant shift in his approach to the war.

Chinese GDP likely exceeded government growth target in 2Q25. Chinese government GDP data (released tomorrow) is expected to show the economy grew 5.1% in 2Q25 on a year-over-year basis, above the government’s annual target. While this would be below 1Q25’s 5.4% print, it would still place 1H25 growth at 5.3%. Higher exports are likely to drive the results, in-part due to the U.S. agreeing to lower tariffs on Chinese goods from 145% to 55% in mid-May, with data today showing exports rose 5.8% in June, the first increase since March. Government fiscal stimulus also played a role, which featured a combination of bank reserve requirement cuts, efforts to improve stock market liquidity, and direct government investments in infrastructure, green energy and digital infrastructure. While the results are expected to be positive, tariff threats from the U.S. still loom large as a key headwind to Chinese economic performance.