TARIFFS
The Trump administration unveiled its reciprocal tariff regime that places a baseline 10% tariff on all imports and adds reciprocal tariffs to imports from many other countries based on their trade surplus with the U.S. China will now face cumulative tariffs of 54% on exports to the U.S. Imported autos will face 25% tariffs. Notably, the reciprocal tariff regime will not apply to Canada and Mexico, the U.S.’s two largest trading partners. Those two nations will only face the already existing tariffs that have exemptions for USMCA covered goods. In response to the Trump administration’s announcement, the Chinese government matched the 34% reciprocal rate, restricted rare earth metals exports to the U.S., halted certain agricultural imports from the U.S., and banned or launched investigations into multiple American firms doing business in China. The dollar, stock markets and oil all declined sharply while Treasuries and other haven assets rose.
Our Take: The reciprocal tariff regime was far harsher than markets had been expecting, although Canada and Mexico came out of it better than most other nations. While most nations are trying to negotiate for relief, the immediate retaliation from China increases the risk of an escalating trade war and will add to the decoupling of the Chinese and U.S. economies. The market reactions indicate greater concerns around inflation and recession as a result of the Trump administration’s actions.
EMPLOYMENT
The economy added 228,000 jobs in March, exceeding expectations of a 140,000 increase. Revisions to the previous two months subtracted 48,000 jobs. The unemployment rate rose to 4.2% from 4.1%. Average hourly earnings rose 0.3% for the month and are up 3.8% year-over-year. The labor force participation rate increased from 62.4% to 62.5%.
Our Take: Job growth was better than expected and indicated positive but slow economic growth in the first quarter. However, the market response was non-existent, as trade policy dominated traders’ attention. As always, future employment reports will be dramatically affected by unfolding economic conditions.
OIL
The Organization of the Petroleum Exporting Countries (OPEC+) made a surprise announcement that the cartel would increase production in May by an amount three times greater than what was previously expected. Crude prices sank over 7% following this announcement combined with the rollout of the new reciprocal tariff regime.
Our Take: OPEC+ appears to be trying to restore discipline among its membership, many of whom have been producing above their quotas. Adding supply in the face of a potential significant decline in demand from trade tensions has the potential to drive crude prices down.
MUNICIPALS
The City of Chicago reported increased revenue collections during the first two months of 2025. City officials reported collecting $365.7 million in revenue, which is 7.2% higher than expected. At the end of last year, Mayor Brandon Johnson implemented several new taxes and fees in lieu of a property tax increase to close the city's budget gap.
Our Take: While the higher-than-expected revenue over the first two months should be viewed as a positive, city officials warned that revenue increases may not continue throughout the year. Uncertainty surrounding federal economic policy and how it will affect the city remains. Chicago will release another revenue update in the summer.