Yields Plummet as Trump Threatens Additional 100% Tariff on China

Yields fall as Trump tariff threats trigger a flight to safety. Rate volatility surged today after President Trump threatened a “massive increase” of tariffs on Chinese goods, which fueled broader concerns about a global economic slowdown. At the end of the session, news broke that it would be an additional 100% tariff rate, which spurred a further decline. Treasury yields closed 6-11 bps lower across a flattening curve, with 2-year and 30-year yields now at 3.50% and 4.62%, respectively, down 7-9 bps on the week. Gold rallied alongside Treasuries in today’s risk-off mood, rising back above $4,000 per troy ounce. Meanwhile, the S&P 500 fell 2.71%, its worst day since April, and the tech-heavy NASDAQ declined by 3.56%.

Trump announces retaliatory tariffs on China. President Trump announced on social media today that he will impose an additional 100% tariff on China, along with export controls on “any and all critical software” starting November 1st. Trump’s threats came in response to yesterday’s announcement that China will impose more controls on rare earth minerals. China’s controls, however, were set to begin on November 8th, after the scheduled meeting between the two nation’s leaders. President Trump threatened to cancel the meeting, noting that he saw “no reason” to follow through on what was supposed to be a continuation of trade negotiations. When considered alongside previously announced levies, the new US tariffs could bring total import duties to 130% for many Chinese goods. This move was also a stark reversal to recent signs of optimism between the two economic powerhouses and political adversaries, and has renewed fears of global trade disruptions.

BLS to release September CPI report by month end. According to a labor department official, the Bureau of Labor Statistics has recalled some employees to prepare the September CPI report as it is needed to calculate cost-of-living adjustments for next year’s Social Security checks. Previously, the BLS paused all operations due to the government shutdown and said there would be no data releases. Since the BLS data reporting process typically takes 8-10 business days, it is unlikely that the report will be ready for its original release date of October 15, but it may come out prior to the FOMC meeting on October 28-29. September core CPI YoY is forecasted to come in at 3.1%, the same as August.