TESL - Trade War, Or Will Cooler Heads Prevail?

2025-04-07 07:46:00 ET

Summary

• Our Fixed Income team estimates that the announced tariffs could muffle growth to below 1%, and that further charges and retaliatory measures could potentially take the U.S. into recession.
• We think U.S. core inflation could climb back to 3.5%, and that creates a dilemma for the U.S. Federal Reserve.
• We think more tariffs may be coming on specific goods and commodities, but, for a few reasons, we consider this to be an opening position in a set of negotiations.

By Joseph V. Amato

Negotiation or retaliation - the world’s response to the surprisingly aggressive U.S. tariff announcements will be critical.

Last Wednesday’s tariff announcements from the U.S. were close to the worst-case scenario and, at the time of writing, have caused a major sell-off in equity markets and a sharp decline in bond yields....

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