TARIFFS
The Trump administration paused implementation of tariffs on imports from China of many electronics and their components, while the Chinese government also paused tariffs on certain imports from the U.S. President Trump stated that many nations are moving towards trade deals with the U.S. that would see them face lower reciprocal tariffs than those announced on “Liberation Day.” The president also stated that discussions are ongoing with China, while the Chinese government denied this and set a unilateral reduction in U.S. tariffs as a precondition for negotiations. Markets continue to react to day-to-day developments on trade policy, showing strength when tariffs are paused or seem less likely, and weakness when trade barriers seem likely to increase.
Our Take: Capital markets are clearly very concerned about the possibility of a drastic increase in trade barriers, and survey data indicate that both consumers and businesses are concerned as well. Significant day-to-day changes in expectations for tariffs and trade are driving increased volatility and uncertainty. Resolution of trade conflicts, especially with China, would be a very welcome development.
DURABLE GOODS
Headline durable goods orders were up 9.2% in March, significantly above expectations. The upside was all from aircraft, which are volatile month to month. Core orders were up just 0.1%, in line with expectations, while February core orders were revised down to -0.3%.
Our Take: It will take more than one month’s data to establish a trend, but a continued slowdown in purchases by businesses and consumers waiting for policy clarity has the potential to reduce growth or cause a recession.
MUNICIPALS
Transportation Secretary Sean Duffy sent New York Governor Kathy Hochul a letter stating that his department will stop funding transportation projects if New York City’s congestion pricing tolls continue. Duffy stated that the State of New York “risks serious consequences if it continues to fail to comply with Federal law.” The Department of Transportation had originally issued a deadline of March 21, then extended it to April 20 for the city to end the toll program. Secretary Duffy has now extended the deadline again to May 21.
Our Take: The Trump administration has been an opponent of the congestion pricing tolls from the onset and has stated that the tolls are illegal. However, some legal experts believe that the tolls are not illegal and that the tolling program would likely stand up in court. Since the beginning of the toll program on January 5, traffic and bridge delays have declined, and air quality has improved. Governor Hochul recently stated that “Congestion pricing is legal. It’s working. Business is up, traffic is down, and the cameras are staying on.”