U.S.-China Trade Negotiations Remain in Focus

President Trump and Treasury Secretary Bessent fuel rate volatility. The selling of longer-term Treasurys came to a halt this morning, with the 10-year yield falling 14 bps to an intraday low of 4.26%. The move was driven by President Trump, who said late yesterday that he would not fire Chair Powell, in addition to offering optimistic comments today surrounding impending trade negotiations with China. However, the move reversed course after Bessent stated that Trump has not offered to eliminate tariffs against China unilaterally. The 10-year yield closed just 2 bps lower on the day at 4.38% while the 2-year yield climbed 5 bps to 3.87%. Meanwhile, the NASDAQ and S&P 500 rose 2.50% and 1.67%, respectively, on the news from President Trump, though Bessent’s comments drove a sell-off after intraday highs were reached at 10:30 EST.

President Trump softens tone on China. Tensions between the U.S. and China have grown strong over the past few months, but a shift may be forthcoming. President Trump clarified that he is not aiming to play “hardball” with Beijing, and he added that levies against China will “come down substantially.” However, he was insistent that the US would “have a fair deal with China. It’s going to be fair,” which aligns with Treasury Secretary Bessent’s comments that the US would not eliminate tariffs against China unilaterally. Meanwhile, the Wall Street Journal reported today that the White House is considering slashed tariffs against China, and one official stated that the levies were likely to be reduced to roughly 50%-65%.

Fed Beige Book notes growing tariff concerns. April’s rendition of the Fed Beige Book, which used information gathered on or before April 14, featured 100+ tariff mentions, more than double the amount versus March’s report. The survey stated that “uncertainty around international trade policy was pervasive across reports” and that outlook “worsened considerably” in several regions amid growing concerns. Most districts also reported that firms expected elevated input costs due to tariffs, while many received notices from suppliers that costs will be raised. Despite the concerns, economic activity was “little changed” versus March’s report, and 5 of 12 districts reported “slight growth.” Interestingly, the report noted “moderate to robust” sales of vehicles and some other nondurable goods, which were “generally attributed to a rush to purchase ahead of tariff-related price increases.”