Trump Offers Tariff Exemption

Yields close well above intraday lows following more tariff news. President Trump delayed automaker tariffs on Mexico and Canada today, which fueled a Treasury sell-off after rates had declined 6+ bps this morning. Stronger than expected services sector data and durable goods orders contributed as well. Yields closed 1-4 bps higher across the curve, a ~10 bp swing from today’s lows. The move pushed the 2-year yield just above 4% while the 10-year yield is at 4.28%. Equities rebounded on the potential for reduced tariffs, with the NASDAQ and S&P 500 up 1.46% and 1.12%, respectively.

President signals openness to negotiate tariffs. Today, President Trump announced a 1-month auto-sector exemption from newly imposed tariffs after meetings with the heads of Ford, General Motors and Stellantis yesterday. Some estimates see tariffs driving up to a 300% increase in the cost to build certain types of cars, and White House Press Secretary Leavitt said the decision was made so that American automakers aren’t at an economic disadvantage. The move spurred hopes that President Trump may exhibit similar leniency on other components of the tariff package over the coming days, in exchange for further concessions from Canada and Mexico.

Durable goods orders and services sector rebound. Today’s better than expected economic data was a welcome surprise amid growing concerns about US economic strength and potential trade wars. January durable goods orders were revised higher 3.2% from 3.1%, the highest level since July 2024. Meanwhile, according to the ISM Services Index (53.5), the services sector expanded in February. The data was of particular importance after earlier figures showed that the services sector unexpectedly contracted for the first time since January 2023.