China Announces Additional Trade Barriers Against the U.S.

Rates fall in a quieter session. Following the past few weeks of elevated volatility, rates markets were relatively quiet today. Treasury yields declined 1-4 bps across most of the curve, largely driven by continued trade wars between China and the U.S. The 2-year yield is currently 3.85%, down 40 bps YTD and -4 bps since the start of April. Meanwhile, the 10-year yield is currently at 4.33%, down only 24 bps YTD after a 13 bp rise so far in April. Elsewhere, equities closed slightly lower today amid the tariff developments, with the DJIA down nearly -0.40% while the S&P 500 fell -0.17%.

China-US tensions continue to grow. Today, China ordered its airlines to refuse deliveries from Boeing in yet another sign of escalating friction with the US. Beijing has also asked for halted purchases of aircraft-related parts from the US. No high-level talks have been initiated to this point, and amidst the standoff, President Trump called on China to reach out for negotiations, saying, “The ball is in China’s court. China needs to make a deal with us. We don’t have to make a deal with them…” He continued by stating, “China wants what we have, what every country wants, what we have — the American consumer — or to put another way, they need our money.”

Meanwhile, EU-US negotiation progress appears limited. EU trade negotiators met with their U.S. counterparts this week, but the latest updates point to little progress. Anonymous sources have reported that the EU’s trade chief, Maros Sefcovic, struggled to understand U.S. objectives after meeting with Commerce Secretary Lutnick yesterday. Furthermore, the US rejected the EU’s proposal that both sides remove all tariffs on industrial goods, including cars, while U.S. officials indicated that reciprocal tariffs, which were included in the 90-day pause, won’t be removed outright. Still, some positive developments have materialized, such as the EU agreeing to delay its retaliatory tariffs after the U.S. pause last week.