President Trump Announces Trade Agreement with U.K.

Rates rise after U.S. – U.K. trade announcement. Treasury yields steadily rose ~10 bps – 13 bps across the long end of the curve today after President Trump announced an initial trade agreement with the U.K, and expressed optimism about upcoming discussions with China. The 2-year yield closed ~10 bps higher at ~3.87%, while the 10-year ended ~11 bps higher at ~4.38%. The announcement followed lower-than-expected jobless claims data, which together fueled greater risk appetite and tempered expectations for Fed rate cuts in 2025. Futures markets now largely expect the Fed to hold rates steady in June, compared to ~67% implied odds of at least a 25bp cut last Wednesday. Major equity indices rose following the announcement and after the President said it’s a good time to buy stocks, climbing ~0.60% – 1.10% on the day.

U.S. and U.K. announce bilateral trade framework. Today, President Trump announced a trade framework with the U.K. that reduces trade barriers across a variety of different product categories, the first trade deal made after the U.S. announcement of its “Liberation Day” tariffs. While specifics are still uncertain, subject to negotiation over the coming weeks, the president called the initial agreement a “breakthrough” and a “tremendous trade deal for both countries.” Looking ahead, hopes grew that today’s deal could serve as a blueprint for agreements with other nations. Riding the optimism and hopes for Congress extending tax cuts he instituted during this first term, the President said, “If that happens, on top of all these trade deals that we’re doing, this country will hit a point – you better go out and buy stocks now.”

Trump floats China tariff cuts. Ahead of today’s high-profile meeting with Chinese officials in Switzerland, President Trump said that he may consider lowering 145% tariffs on China if discussions go well. He said, “I mean, we’re going to see. Right now you can’t get any higher. It’s 145% so we know it’s coming down. I think we’re going to have a very good relationship.” The President expressed his confidence that progress will be made at the discussions, saying, “I think it’s going to be substantive,” and believes that China will be open to cutting its own tariffs against the U.S. and reducing trade barriers.