What Will Be The Impact Of The Pause That Wasn’t?
Be prepared for a rocky day and potentially more changes to "the plan"
Yesterday, the Trump Administration blinked and pulled away from the most extreme implementation of its planned tariffs. And the markets at the time reacted favorably. There was only one issue: because the messaging was so confusing, and even high-level Administration members got the details wrong, it took hours to sort out the actual implementation details.
As a result, it wasn’t until after the market closed that people fully understood this wasn’t a pause in reciprocal tariffs. The real adjustment was that most of those tariffs, which were still implemented, were set at 10%. That 10% is still a significant increase over any existing tariffs that were already in place.
As a result of processing that information, market futures have been down from yesterday’s temporary rally. However, as we’ve seen, the Trump administration seems okay with a shaky stock market. While they will celebrate the gains, there isn’t a lot of evidence that losses will cause them to move.
However, the Trump administration has a much bigger problem: the Bond Market. One of the many suggested goals of Trump’s tariff plans (to the degree there is a plan) was to try to drive down bond interest rates to renegotiate our foreign debt.
The Trump administration has talked a lot about the yield on the 10-year Treasury, the benchmark for rates on mortgages and other common types of loans, as the president pledges to bring down borrowing costs for Americans. Data suggests more households are exposed to changes in interest rates than swings in the stock market, but the effect of tariffs on inflation might ultimately be the most impactful economic issue for voters. [source]
Unfortunately for the Administration, long term bond interest rates SPIKED after the tariff announcement last week, getting very close to the 5% threshold at one point. Yesterday, the President more or less admitted that the bond market was what ultimately led to the change in tariff policy:
And, for a little bit, the bond market seemed to react favorably to these decisions. However, like the markets, as the dust settled, reductions to bond interest rates began disappearing overnight. As I write this, the rate on the 10-year Treasury bond is approximately 4.35% (still significantly higher than it’s pre-announcement tariff announcement (4.1%).
If the bond market continues to rise, then we may very well see another “planned” change to the-not-really-a-plan plan. The only thing we can be certain for the next few weeks (at a minimum) is more uncertainty. And again, uncertainty is really bad for long-term business planning (i.e., trying to decide if folks are going to invest in moving production back to the US).
What gets me today is how many Trumpies are praising him for the “biggest jump in the stock market in history” when he was the one who blew it up in the first place, and it’s only halfway back to where it was before.
This is like praising an arsonist for showing up and putting out half the fire he started. Unbelievable.
Counting on forbearance here by foreign governments opting for stability and not rocking the boat, as they could play hardball at the Treasury note and bond auctions. See this PRC comment I posted in the other thread:
It’s fascinating in a mirror-universe way to watch RWers use “meatpacking plants” as their example of a factory job that “is going to boom” under Trump.
One, “The Jungle” was written about meatpacking plants without regulation, and was one of the main reasons for the founding of the FDA, which you’re trying to eliminate.
Two, no factory is getting built without the .gov removing the risks of training the labor force [community colleges, high school, college etc] and the time it takes to come online AND the availability of nearby supplies for that factory. This is exactly what an industrial policy looks like — and is exactly what Trump killed when he shut down the CHIPS act.
Three, jobs in factories have to be HIGH paying not low paying to get people to take them. Oopsie.
Four, those meatpacking plants employ the very immigrants you’re trying to deport.. both because Americans won’t take those jobs and because the jobs don’t pay enough.
It wasn’t the “countries” that did anything to Screw The US [Trump’s words, not mine], it was the very billionaires standing behind Trump who personally chose to move those factories overseas for the profit.
@Gavin:
One of the maddening things about the whole “on-shoring” discussion is that, without any doubt, things like the CHIPS Act are the way to bring certain factories to the US. And yet, CHIPS Act bad!
DJIA is down over 800 at the moment. So much for the rally!
Yes, and the negative impact of MAGA tomfoolery hits not just markets. This unqualified, unserious Republican regime’s reckless incompetence menaces real people’s livelihoods and lives.
Beth Benike, Minnesota Small Businessesperson of the Year, on how the narcissistic manbaby-in-chief has hurt her company Busy Baby:
Asked if she is helped by the “PAUSE” forced upon Putin-puppet nepo baby and rapist criminal Trump:
Asked about the possibility of manufacturing her products in the US:
Chaos and failure, brought to you by the neofascist American right and its enablers. Fully predictable. Too bad so many focused on nitpicking the imperfections of Biden, Harris, and Democrats.
@Gavin:
Fun fact, I used to live near Bubbly Creek which was featured in The Jungle.
I made the mistake over going for a run during a particularly hot day a couple of years ago and ran down 35th street. I didn’t smell anything until I was close to the bridge over it. By the time I got to the middle of the bridge I almost passed out from the smell. They’ve never really done much to remediate it, but it doesn’t smell as bad as it did. Now they’re building fancy houses near it.
Conservatives have forgotten so much they have no idea what to conserve.
Duh, that’s what children and slaves, oops, I meant prisoners, are for.
@DK:
Screw it, lets dance.
@DK:
Call it a Buridan’s Ass variant. Once the animal decides between hay and water, one moves randomly closer and the other randomly farther, leaving the poor donkey flummoxed as well as undecided.
about the results you can expect from letting an actual ass make policy decisions with consequences.
@Beth: Conservatism hasn’t ever been about anything beyond conserving the status quo of conservatives for as long as I’ve been alive. What happens to anyone else is of no consequence.
As of noon Eastern today:
Dow -1,552 (-3.8%)
S&P 500 -253 (-4.6%)
NASDAQ -951 (-5.6%)
The impact of “the pause that wasn’t” was to make Trump and assorted insiders a lot of money, and fuck over the rest of us.
@Mikey:
No, remember? He gave the public (errr…his 9.45 million followers on truth social) a heads up. Better than insider trading.
Oh, shit. I wonder if he gave them a heads up on the reversal…
@Steven L. Taylor: In addition to “CHIPS act bad”, they, and we, just watched it take a couple years for the supply chains to recover after COVID. Conservatives, despite their worship of the market can’t seem to accept evolution, the market is adaptive. It evolves. And like biological evolution, it takes time.
US Treasury bond yields are still at 4.75% and showing no signs of dropping.
The dollar is currently below 0.895 to the euro.
All the US stock markets are down on the day.
It seems the markets are processing the fact that the US still has a universal tariff of 10%, plus (as far as anyone can make out in the utter comms chaos) additional rates on Canada and Mexico, and on vehicles.
In addition to the 145% tariffs on Chinese goods.
While China is retaliating, and the EU currently pausing its own retaliation, pending anyone being able to determine what the US policy actually IS.
The hit to the US “real economy” is going to materialise quite soon.
And it will not be trivial.
European stock futures are mostly up about 4% or 5%. So disconnecting from the direction of U.S. stocks. Is the special reserve status of the U.S. dollar perhaps going fuckity-bye?
https://www.investing.com/indices/indices-futures
Perhaps a $5T budget deficit combined with a mad king not so good for dollar credibility, or U.S. treasury paper.
@JohnSF:
Unknowable while the mad king is in power, and possibly even in the unlikely event he strokes out or whatever, given he would just be replaced by other crackpots (e.g., Curtis Yarvin acolytes).
@charontwo: This is a wild-ass guess, but I think that Vance is a chameleon, and would likely behave quite differently with Trump out of the picture. I think he might pretend to carry on the MAGA banner, but handle stuff quite differently.
I don’t know that I’d say “better” just “different”.
@Jay L Gischer: I’m pretty confident about not better. Course, it depends on what “better” is. For those who, in the words of the late Tom Lehrer, wanna go back to Dixie, different should work just fine.
@DK: “We don’t have any time to make any adjustments.”
To me, this is the money quote. So, so many people are being adversely affected by Trump’s tariffs and Executive Orders, Elon Musk and DOGE’s firings, upcoming changes to federal policies, etc, virtually all of which are going into effect immediately (until rescinded without warning). It’s not just international trading partners or small business owners that “don’t have any time,” it’s virtually EVERYONE. The cruelty – or to be kind, the incompetent lack of advance planning and warning – is endemic to ALL of what we’re talking about.