Appeals Court Reinstates Trump Tariffs

Rates fall in a busy session. Treasury yields declined gradually throughout today’s session, largely in response to uncertainty created by court rulings on Trump’s tariffs. Lower than expected core PCE (3.4% QoQ) and an economic contraction (-0.2% GDP) in Q1 also contributed to the move. Yields closed 5-7 bps lower across most of the curve, with the 2-year at 3.94% and the 10-year at 4.42%. Markets are now looking ahead to tomorrow’s broader PCE slate, which is expected to show mixed results.

Tariffs continue to fuel uncertainty. The U.S. Court of International Trade ordered last night that most of Trump’s levies, including the 10% baseline tariff and separate measures against China, Mexico, and Canada, be immediately halted. The Trump administration justified the tariffs by citing the International Emergency Economic Powers Act of 1977 (IEEPA), but the judges argued, “the court does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder.” However, a federal appeals court temporarily blocked the judges’ ruling today, and White House officials said they would defend the legality of the levies to the Supreme Court. One of Trump’s top trade advisers, Peter Navarro, stated, “the Trump tariff agenda is alive, well, healthy, and will be implemented to protect you, to save your jobs and your factories.”

Chair Powell and President Trump meet at the White House. The Fed released a statement saying that Chair Powell met with President Trump today to discuss the economy. Powell made clear that the “path of policy will depend entirely on incoming economic information” and that the path forward will be “based solely on careful, objective, and non-political analysis.” Meanwhile, President Trump remained consistent with his criticism of Powell for not lowering rates after referring to the Fed Chair as “Too Late Powell” a few weeks ago. White House Press Secretary Karoline Leavitt added that delayed rate cuts are “putting us at an economic disadvantage to China and other countries, and the president’s been very vocal about that, both publicly and, now I can reveal, privately.”