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Member Briefing April 11, 2025

Date postedApril 11, 2025
Posted By: Harold King Daily Briefing,

CPI = 2.4 – U.S. Consumer Inflation Eases Ahead Of Tariffs

U.S. consumer prices unexpectedly fell in March amid cheaper gasoline and used motor vehicles, but the benign inflation reading is unlikely to be sustained after President Donald Trump doubled down on tariffs on imported Chinese goods. The first monthly decline in prices in nearly five years, reported by the Labor Department on Thursday, also suggested softening demand amid heightened recession fears due to tariffs, and led financial markets to anticipate the Federal Reserve could cut interest rates by 100 basis points this year. Excluding food and energy, so-called core inflation ran at a 2.8% annual rate, having increased 0.1% for the month. That was the lowest rate for core inflation since March 2021.

  • A 6.3% drop in gasoline prices helped drive a 2.4% broader decline in the energy index.
  • Food prices climbed 0.4% on the month. Egg prices rose another 5.9% and were up 60.4% from a year ago.
  • Shelter prices, among the most stubborn components of inflation, increased just 0.2% in March and were up 4% on a 12-month basis, the smallest gain since November 2021.
  • Used vehicle prices were off 0.7% while new vehicle costs increased just 0.1%, ahead of tariffs that are expected to hit the auto industry hard.
  • Airline fares declined 5.3% in March
  • Motor vehicle insurance dropped 0.8%
  • Prescription drugs fell 2%.

Read more at CNBC

How The Bond Market Helped Make Trump Blink On Tariffs

President Trump hit the pause button on reciprocal tariffs — and the bond market convinced him. In the lead-up to the president's pivot, markets were unraveling: Stocks slid sharply, with the S&P 500 on the brink of a bear market. But the real alarm bell? A sharp, unexpected surge in long-term Treasury yields — a move that seemed to force the president’s hand. At its highs of the week on Wednesday, the 10-year yield (^TNX) traded at 4.47%, a massive 60 basis point swing from Monday's low of 3.87% and the biggest three-day jump since December 2001.

The bond market serves as a "cash collateral" of sorts to US and global investors who can then borrow money and bet on riskier assets like stocks. It's also viewed as a safe haven during times of uncertainty, which has been the word du jour — even while Wall Street remains on edge because shifting trade dynamics could induce a self-inflicted recession.

Read more at The WSJ

In Charts: Here’s How Much Business The U.S. and China Do

President Trump on Wednesday gave the rest of the world a partial reprieve on tariffs but raised import duties to 125% on China, all but closing the U.S. to its third-largest supplier of goods. On Thursday the Administration confirmed that the tariff total on China is 145%.

The U.S. imported $438.9 billion worth of goods from China in 2024, according to the Census Bureau. In total, the U.S. bought $3.3 trillion worth of goods from countries around the world in 2024. Goods from China represented 13.3% of total U.S. imports, making China the third-largest supplier of goods to the U.S. Products such as smartphones, computers, toys and videogame consoles accounted for 55.5% of U.S. imports from China. Here are five charts to help you visualize the relationship.

Read more at the WSJ

House GOP Adopts Trump Budget Blueprint After Last-Minute Scramble

House Republicans on Thursday adopted the Senate’s framework that will be used to enact key parts of President Trump’s legislative agenda, getting the blueprint over the finish line after a last-minute scramble to win over conservatives who had spent days railing against the measure. The largely party line 216-214 vote marks a big win for Speaker Mike Johnson (R-La.), who has pushed an aggressive timeline to advance Trump’s domestic policy priorities, and President Trump, who endorsed the legislation and lobbied those on the right flank to get on board.

“It was a good day in the House,” Johnson told reporters after the vote. “I told you not to doubt us. The media always does. The Democrats always do. But we get the job done, and we’re really grateful to have had the big victory on the floor just now.” The linchpin in leadership’s effort appeared to be a joint press appearance Thursday morning by Johnson and Senate Majority Leader John Thune (R-S.D.), where the pair delivered brief remarks regarding spending cuts. Wall Street analysts have floated several theories to explain recent yield volatility, from sticky inflation and a cautious Fed to a shift from bonds to cash and thinning Treasury market liquidity. Ongoing uncertainty stemming from inconsistent trade dynamics has only added to the instability.

Read more at The Hill

The U.S. and China Are Going to Economic War—and Everyone Will Suffer

In jacking up his tariffs on China—and pausing steep duties on dozens of other nations—President Trump is pushing the world’s two biggest economic powers into a battle that will leave neither unscathed and risks tanking the global economy. The total tariffs imposed on China in Trump’s second term now add up to 145%, the White House said Thursday. They could eventually be walked back, but already, there are signs that a portion of the $582 billion in goods trading between the two countries is grinding to a halt. U.S. factories are canceling orders and some Chinese manufacturers are putting workers on temporary leave. Data has shown a sharp decline in trans-Pacific ship bookings since some of the latest tariff escalations began. U.S. stocks fell sharply Thursday as investors digested the developments.

​In the 23 years since China joined the World Trade Organization, access to its cheap manufactured products has become embedded in the consumer-focused U.S. economy. China accounted for around 13% of all U.S. goods imports in 2024. It is a source of a wide variety of goods, including smartphones, toys and industrial parts. Entire businesses have been built around assumptions of that access, with design, marketing and distribution in the U.S. coupled with production in China.  Many businesses had begun to adjust to a reality of higher tariffs that started during the first Trump administration. But if the new tariffs remain, they face a loss of access to Chinese production altogether—with profound changes for American consumers. Americans, already stressed from a 24% rise in prices over the past five years, could end up paying even more for a smaller selection of everyday goods.

Read more at The WSJ

U.S. Dollar Index Suffers Biggest Drop Since 2022, Hits New Low For The Year

The ICE U.S. Dollar Index dropped sharply again on Thursday, putting the greenback on track for its worst day since 2022. The index, which measures the U.S. dollar against a basket of global currencies, was last down 1.83% to 101.02. At one point in the session, it slipped below the 101 level. This would mark the index’s lowest close since September. The drop Thursday widens the struggle for the dollar in the face of President Donald Trump’s aggressive trade policy. Wall Street originally anticipated that the tariffs would boost the dollar, but instead the U.S. currency has fallen more than 7% since Trump’s inauguration, and more than 2% since the president unveiled his full trade policy last week.

The decline for the dollar has come along with sell-offs in U.S. stocks and bonds. This could be a sign that foreign investors are responding to Trump’s protectionist policies by dumping U.S. assets, putting downward pressure on the dollar. Rising worries about an economic recession could also be weighing on the dollar. Some of the greenback’s biggest declines on Thursday came against the Japanese yen and the Swiss franc, two of the leading safe-haven currencies.

Read more at CNBC

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