President Trump Says He Expects Significant Concessions from China

Treasurys rise following tariff news, weak economic data. Yields declined 2-8 bps across the curve today following more aggressive comments from President Trump regarding impending trade negotiations with China. A decline in consumer sentiment and spiking inflation expectations also contributed after both raised concerns about a potential economic slowdown. The 2-year yield closed at 3.75%, a 5 bp decline on the week, while the 10-year yield closed at 4.24% after an 8 bp decline this week. Markets will now look ahead to next week’s inflation (PCE) and GDP figures to gauge US economic resilience and the Fed’s path forward.

The U.S. is unlikely to extend the 90-day tariff pause. President Trump still expects material concessions from Beijing despite having taken a softer tone toward China over the past few days. He stated today that the U.S. would not drop levies against China unless they offer “something substantial,” adding that the White House is “unlikely” to extend the current 90-day tariff pause. Meanwhile, it was reported today that China may suspend 125% tariffs for some US imports; reduced levies on U.S. medical equipment, industrial chemicals, and plane leases are among the considerations. Separately, negotiations between the U.S. and Japan appear to be progressing well, with President Trump saying today that “We’re doing very well with Japan. We’re very close to an agreement.”

Consumer sentiment plummets amid tariff concerns. The University of Michigan’s consumer sentiment index plummeted to 52.2 in April, the fourth lowest level over the last several decades. The survey concluded after President Trump’s 90-day tariff pause announcement, suggesting that consumers are still concerned about potential failed negotiations. Joanne Hsu, director of the survey, said, “Even more concerning for the path of the economy, consumers anticipated weaker income growth for themselves in the year ahead. Without reliably strong incomes, spending is unlikely to remain strong…” Meanwhile, University of Michigan inflation expectations were 6.5% for the year ahead, the highest level since 1981.