President Trump Eases Auto Tariffs

Yields fall on U.S. economic data. Treasury yields fell 2-5 bps across the curve today, pushing 2-year and 10-year yields to 3.65% and 4.17%, respectively. The move was initially driven by a record U.S. trade deficit in goods, which jumped to -$162B in March, a negative input for Q1 GDP. A near 5-year low in Conference Board US consumer confidence data (86.0) also contributed to increased demand for Treasurys.  Meanwhile, equities generally rose today after President Trump eased auto tariffs, with the NASDAQ and S&P 500 up just below 0.60%.

Auto tariffs are expected to be eased. President Trump signed an executive order today that will prevent 25% tariffs on foreign-made cars from stacking on top of other active levies. The order will be retroactive, meaning automakers could be reimbursed for tariffs that have already been paid. The move will also allow car makers to be reimbursed on auto-part-import levies, worth up to 3.75% of the value of a US-made vehicle for one year, followed by 2.5% in year-2 and 0% thereafter. Commerce Secretary Howard Lutnick said, “This deal is a major victory for the president’s trade policy by rewarding companies who manufacture domestically while providing runway to manufacturers who have expressed their commitment to invest in America and expand their domestic manufacturing.”

Consumer confidence continues to plummet. The Conference Board’s consumer confidence index fell from 93.9 in March to 86 in April, below expectations of a slightly more muted decline to 88. The results notched a 5th consecutive decline since last November’s 112.8 reading, pointing to the most pessimism amongst consumers since May 2020’s 85.90 reading. In addition, the future expectations reading plummeted from 66.9 to 54.4, the lowest since 2011. The release follows University of Michigan confidence data, which most recently fell to its fourth-lowest level in decades. Trade policy remains the key driver, with write-in responses to the surveys seeing mentions of tariffs reach an all-time high and explicit references to fears about the impact of tariffs on inflation and economic growth.