Economic Data May Show Early Impact of Trump Policies

Yields fall and the Dollar weakens ahead of a busy week. Treasury yields fell throughout the day, ending ~2-6 bps lower across the long end of the curve. The 2-year yield closed at ~3.69% and the 10-year yield ended at ~4.21%. The declines come as markets brace themselves for a week featuring employment, PCE and GDP growth data, among other notable releases, which could offer clues about the early impacts of President Trump’s tariff policies and DOGE government staffing cuts. The first item on the calendar, today’s Dallas Fed Manufacturing Activity data, saw the overall index decline to the lowest level since May, 2020 due to tariff concerns. The dollar fell alongside short-term yields today, with the Bloomberg Dollar Spot Index falling ~0.6%. This week also features the bulk of “Magnificent Seven” earnings releases. Equities closed the day mixed, but roughly unchanged, across major indices.

China continues to deny trade talks and plans support for exporters. Today, China maintained it’s stance that trade talks with the U.S. haven’t occurred, with Foreign Ministry spokesman Guo Jiakun saying, “As far as I know there have not been any calls between the two presidents recently.” This contradicts President Trump telling Time Magazine that he recently spoke with Xi Jinping. Jiakun’s statement followed news that the Chinese government proposed several policies to aid domestic exporters that may be impacted by tariffs, a key consideration for a sluggish economy that saw a late-2024 boost largely powered by international exports.

Early signs of trade-war stress appear. So far, consumers haven’t felt the full impact of the trade war with China, however the lag-period may end soon. Global logistics firm Flexport noted a decrease in shipping volumes from China to the U.S, with Flexport CEO Ryan Peterson recently saying on social media that ocean container bookings from China to the U.S. declined +60% over the three weeks after tariffs took effect. According to Port of Los Angeles Executive Director Gene Seroka, cargo arriving at the Port of Los Angeles is expected to decline by 35% by next week, as “essentially all shipments out of China for major retailers and manufacturers have ceased…” In turn, Apollo Global Management Chief Economist Torsten Slok expects empty shelves in stores by late May, and a U.S. recession this summer.