Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, April 8, 2025

AI Summary. The Treasury basis trade — leveraged hedge fund bets, sometimes up to 100x, on convergence between Treasury cash and futures prices — stands at roughly $800bn within $2tn of outstanding prime brokerage balances. An exogenous shock could force a rapid unwind of these positions, disrupting broker-dealer market functions.

Torsten Sløk Apollo
Date Posted:

Yesterday’s 20 bps rise in long-term yields may have been driven by an unwind of highly leveraged efforts to arbitrage the difference between Treasuries and Treasury futures, which were funded by ~40% of the $2T in prime brokerage balances.

Does the leveraged Treasury basis trade pose risks to market functioning?

Core argument: The Treasury basis trade stands at roughly $800 billion and forms an important part of the $2 trillion outstanding in prime brokerage balances, and is expected to expand as US government debt levels grow.

Yesterday long-term interest rates went up 20 basis points despite stocks going down. One potential reason for the move higher in rates is an unwind of the basis trade. The basis is the difference in price between a Treasury security and a Treasury futures contract with similar characteristics. The source of this price difference is demand and supply imbalances in Treasury markets, or arbitrage limitations for regulatory reasons. In the basis trade, hedge funds put on leveraged bets, sometimes up to 100 times, with the goal of profiting from the convergence between the futures price and the bond price, as the futures contract approaches expiry. How big is the basis trade? It is currently around $800 billion and an important part of the $2 trillion outstanding in prime brokerage balances. It will continue to expand as US government debt levels continue to grow. Why is this a problem? In case of an exogenous shock, the highly leveraged long positions in cash Treasury securities by hedge funds are at risk of being rapidly unwound, which could lead to a significant disruption in market functions of broker-dealer firms.

Takeaways by Macro Roundup® AI

  1. The Treasury basis trade stands at roughly $800 billion and forms an important part of the $2 trillion outstanding in prime brokerage balances, and is expected to expand as US government debt levels grow.
  2. Long-term interest rates rose 20 basis points even as stocks fell, with one potential explanation being an unwind of the basis trade, in which hedge funds use leverage of sometimes up to 100 times to profit from convergence between Treasury futures and bond prices.
  3. An exogenous shock risks rapid unwinding of hedge funds' highly leveraged long positions in cash Treasury securities, which could significantly disrupt the market functions of broker-dealer firms.

Related Articles:

  • Treasury Market Dysfunction and the Role of the Central Bank — The authors argue the Federal Reserve could relieve Treasury market strain by buying cash Treasuries while fully hedging with offsetting short positions in Treasury derivatives, taking the other side of hedge funds' unwinding of hedged positions. Because this removes no net duration from the market, it distinguishes market-functioning purchases from quantitative easing.
  • Bond Market Turbulence Lifts 30-Year Yield Most Since March 2020 — US government bonds sold off, with yields rising by at least 20 basis points across all maturities and 30-year yields up nearly 23 basis points, amid signs investors were regaining appetite for risk. Traders' bets on Federal Reserve rate cuts fluctuated between three and five quarter-point reductions for the year.
  • Manic Monday Looks Like the End of the Beginning — US Treasuries suffered their largest daily selloff since the Covid shock, with the 30-year yield rising by an amount seen only six times since 2010; one explanation is that an investor was forced to sell to raise cash. Traders' concern centers on multi-strategy hedge funds that could trigger cascading sales.

AI Summary. US Treasuries suffered their largest daily selloff since the Covid shock, with the 30-year yield rising by an amount seen only six times since 2010; one explanation is that an investor was forced to sell to raise cash. Traders' concern centers on multi-strategy hedge funds that could trigger cascading sales.

John Authers Bloomberg
Date Posted:

A likely contributor to the largest Treasury selloff since Covid was a dash for cash in the aftermath of forced sales, @johnauthers speculates. “Traders will be most concerned for the health of the pod shops in their midst.”

Did forced selling by hedge funds drive the Treasury selloff?

Core argument: The Treasury selloff was the biggest daily move since Covid, with the 30-year yield rising this much in a single day only six times since 2010, and it occurred while risk was perceived as extreme.

This was the biggest daily Treasury selloff since Covid. The 30-year yield has only risen this much in a day six times since 2010 — and all of this when risk is perceived to be extreme. What on earth happened? A logical but alarming explanation is that someone somewhere had to make forced sales to raise cash. If there is one alarming scenario that recurs, it’s of a contemporary LTCM meltdown — a repetition of the extreme market pain that resulted when the Long-Term Capital Management hedge fund ran into trouble in the wake of the 1998 Russian debt default. That incident only ended with a rescue coordinated by the Fed and then an emergency rate cut. Ever since LTCM, every market selloff has brought with it fears that some big institution will hit trouble and cause cascading sales. It’s logical to worry about that now. Particular concern attaches to the multi-strategy hedge fund groups that operate several different investment teams — “pod shops” in the Wall Street lingo. As the dust settles on an extraordinary day, traders will be most concerned for the health of the pod shops in their midst.

Takeaways by Macro Roundup® AI

  1. The Treasury selloff was the biggest daily move since Covid, with the 30-year yield rising this much in a single day only six times since 2010, and it occurred while risk was perceived as extreme.
  2. A logical but alarming explanation for the Treasury selloff is that someone somewhere had to make forced sales to raise cash, recalling the market pain that followed Long-Term Capital Management's trouble after the 1998 Russian debt default.
  3. The LTCM episode ended only with a rescue coordinated by the Federal Reserve followed by an emergency rate cut, and traders' particular concern now attaches to multi-strategy hedge fund groups known as "pod shops.".

Related Articles:

  • Treasury Market Dysfunction and the Role of the Central Bank — The authors argue the Federal Reserve could relieve Treasury market strain by buying cash Treasuries while fully hedging with offsetting short positions in Treasury derivatives, taking the other side of hedge funds' unwinding of hedged positions. Because this removes no net duration from the market, it distinguishes market-functioning purchases from quantitative easing.
  • Bond Market Turbulence Lifts 30-Year Yield Most Since March 2020 — US government bonds sold off, with yields rising by at least 20 basis points across all maturities and 30-year yields up nearly 23 basis points, amid signs investors were regaining appetite for risk. Traders' bets on Federal Reserve rate cuts fluctuated between three and five quarter-point reductions for the year.
  • What Is the Basis Trade? — The Treasury basis trade — leveraged hedge fund bets, sometimes up to 100x, on convergence between Treasury cash and futures prices — stands at roughly $800bn within $2tn of outstanding prime brokerage balances. An exogenous shock could force a rapid unwind of these positions, disrupting broker-dealer market functions.

AI Summary. Rising German and Japanese 10-year government bond yields—around 2.66% and 1.25%—make those markets more attractive than US Treasuries for European and Japanese investors who hedge their dollar exposure, potentially shifting allocations toward home markets. Foreign investors own about a third of the Treasury market, mostly in longer maturities.

Greg Ritchie, Michael Mackenzie, and Mia Glass Bloomberg
Date Posted:

While German and Japanese bond yields remain below the 10-year Treasury, they may attract local investors who want to hedge dollar exposure. This could undermine foreign demand for US debt, which currently accounts for ⅓ of total holdings of Treasuries.

Are rising foreign bond yields drawing investors away from Treasuries?

Core argument: Germany's 10-year bund yield at 2.66%, reflecting the prospect of heavy issuance as the government ramps up defense spending, and Japan's 10-year yield near 1.25% after years around zero, look more attractive than Treasuries to European and Japanese investors who hedge their dollar exposure.

In Germany, the 10-year bund at 2.66% reflects the prospect of a flood of bond issuance as the government ramps up defense spending. Meanwhile, the rate on 10-year Japanese bonds has soared after spending years around zero and is now around 1.25% as investors brace for tighter monetary policy there. While both are still well below Treasury yields, they’re at levels that make them look more attractive than Treasuries to European and Japanese investors who hedge their dollar exposure when buying US securities. That might entice investors to shift allocations to their home markets, where the policy outlook appears more stable. All in, foreign ownership of US Treasuries amounts to about a third of the market, while the foreign sector was the largest source of US bond demand last year, according to a Barclays Plc analysis of fund flow data. That reflected net buying of $910 billion, about half of which was in Treasuries, they said. Crucially, the vast majority of foreign Treasury holdings are in longer maturities, according to US government data.

Takeaways by Macro Roundup® AI

  1. Germany's 10-year bund yield at 2.66%, reflecting the prospect of heavy issuance as the government ramps up defense spending, and Japan's 10-year yield near 1.25% after years around zero, look more attractive than Treasuries to European and Japanese investors who hedge their dollar exposure.
  2. Foreign investors own about a third of the US Treasury market, and the foreign sector was the largest source of US bond demand last year with net buying of $910 billion, about half of it in Treasuries, according to a Barclays analysis of fund flow data.
  3. The vast majority of foreign Treasury holdings are in longer maturities, according to US government data, while higher German and Japanese yields might entice investors to shift allocations to their home markets, where the policy outlook appears more stable.

Related Articles:

  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.
  • Germany’s Spending Push Drives Up Borrowing Costs Across Eurozone — Germany's planned defence spending has pushed 10-year German government bond yields close to 3%, lifting borrowing costs across the eurozone because German debt serves as the bloc's benchmark. Investors warn this intensifies pressure on heavily indebted economies; one simulation projects Italy's debt-to-GDP ratio reaching 153% and France's 122% by 2030 absent spending cuts or faster growth.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.

AI Summary. Cyclical and event-driven bear markets have both averaged declines of roughly 30%, but cyclical ones last about two years and take five to recover, versus about eight months and one year for event-driven; structural bear markets average 60% declines over three-plus years and take a decade to recover.

Peter Oppenheimer, Sharon Bell, Lilia Peytavin and Guillaume Jaisson Goldman Sachs
Date Posted:

The US is now in an “event-driven bear market.” These “tend to last around eight months and recover in about a year,” with a 30% decline. The risk of a recession may yet trigger a “cyclical bear market” with a similar decline but longer duration.

How do bear market types differ in depth, duration, and recovery?

Core argument: The authors argue the market is in an event-driven bear market, which averages a roughly 30% decline over about eight months and recovers in about a year, versus cyclical bear markets lasting around two years with five-year recoveries.

We argue that we are currently in an event-driven bear market. In terms of profiles, the average cyclical and event-driven markets generally tend to fall around 30%, although they differ in terms of duration. Cyclical bear markets last an average of around two years and take around five years to fully rebound to their starting point, while the event-driven ones tend to last around eight months and recover in about a year. Structural bear markets have by far the most severe effects. The average declines are around 60% playing out over three years or more, and they tend to take a decade to fully recover. The forward P/E multiple on the S&P 500 is 19.4x, which still ranks above the 80th percentile of a 25-year data set. While structural changes in the market composition may limit the scale of the de-rating from here (technology has grown as a share of the index and the sector is dominated by companies with strong balance sheets and net cash), there remains downside. The S&P 500, for example, troughed with a P/E of 14x in 2018, 13x in 2020 and 15x in 2022.

Takeaways by Macro Roundup® AI

  1. The authors argue the market is in an event-driven bear market, which averages a roughly 30% decline over about eight months and recovers in about a year, versus cyclical bear markets lasting around two years with five-year recoveries.
  2. Structural bear markets have by far the most severe effects, with average declines of around 60% playing out over three years or more and full recoveries taking about a decade.
  3. The S&P 500's forward P/E of 19.4x ranks above the 80th percentile of a 25-year data set, and the index troughed at 14x in 2018, 13x in 2020 and 15x in 2022, leaving downside even as technology's larger index share and net-cash balance sheets may limit de-rating.

Related Articles:

  • The Alchemists — NVIDIA's share of all US capital spending is projected to approach two 20th-century peaks by 2026, and large cloud providers would need $400–500bn in new revenue to earn their traditional 50% gross margin on roughly $250bn of annual data center spending. After the dot-com collapse, Corning's fiber optic revenues did not surpass 2000 levels until 2018 in nominal terms.
  • Magnificent 7 Hit Harder by Global Slowdown and Potential Retaliation — About 50% of earnings at the seven largest US technology companies come from abroad, versus 41% for the S&P 500, leaving them more exposed to a trade war that weighs more heavily on economies where trade is a bigger share of output. European retaliation via a digital services tax could further reduce their earnings.
  • There’s No Sign That Markets Have Had Enough Yet — A classic 60% stock/40% bond portfolio sits at a six-month low while retaining most of its post-pandemic gains, and sharply wider credit spreads suggest a revival in recession risk. Contrary to the expectation that US tariffs would strengthen the dollar, the dollar fell even as money flowed into Treasuries.

AI Summary. Bloomberg Economics projects that if US tariffs stand and targeted countries retaliate with duties half as large, US goods imports would be about 30% lower by 2030 than otherwise, with China's exports to the US falling 85%. China is expected to redirect most of those exports to other markets, amplifying pressure on economies already losing US sales.

Shawn Donnan, Maeva Cousin, Enda Curran and James Mayger Bloomberg
Date Posted:

New US tariffs will reduce imports by 30% and China’s exports to the U.S. will decline by 85% as of 2030, per Bloomberg’s model. China will redirect that lost trade just “as other economies struggle with the loss of their own exports to America.”

How would tariffs reshape US imports and Chinese export flows?

Core argument: Bloomberg Economics estimates that if Trump's tariffs stand and targeted countries retaliate with duties half as large, US goods imports from the rest of the world would be about 30% lower by 2030 than under unchanged tariffs.

The new analysis of global trade data by Bloomberg Economics points to how and why Trump’s tariffs are forcing economies around the world to re-examine their most important trade and investment relationships. According to a scenario in which the Trump tariffs stand and targeted countries retaliate by imposing duties half the size on imports from America, US imports of goods from the rest of the world would be around 30% lower by 2030 than they would’ve been if tariffs remained unchanged. China is hit hardest with an 85% slump in exports to the US. [The] analysis of trade flows and economic relationships finds that China is likely to redirect most of its exports to replace the market it stands to lose in the US — just as it did following Trump’s first trade war. The challenge is that this time it will do so as other economies struggle with the loss of their own exports to America. While the risks from higher Chinese exports are likely to be smaller than the impact of the drop in US imports, Trump’s move is set to amplify the China shock and threatens to prompt a rolling wave of protectionism.

Takeaways by Macro Roundup® AI

  1. Bloomberg Economics estimates that if Trump's tariffs stand and targeted countries retaliate with duties half as large, US goods imports from the rest of the world would be about 30% lower by 2030 than under unchanged tariffs.
  2. China is hit hardest in the Bloomberg Economics scenario, with an 85% slump in its exports to the US.
  3. Bloomberg Economics' analysis of trade flows finds China is likely to redirect most of its exports to replace the market it stands to lose in the US, as it did after Trump's first trade war, while other economies struggle with their own lost US exports.

Related Articles:

  • The Evolution of Global Trade in 2024 — Global trade imbalances consist of one very large surplus and one very large deficit: China's goods surplus exceeds $1tn a year, while the U.S. non-petroleum deficit drives the Asian surplus. The author argues a Chinese surplus this large can be sustained only alongside a large U.S. deficit.
  • A New ‘China Shock’ Is Destroying Jobs Around the World — Indonesia's textiles and apparel industry lost roughly 250,000 jobs over two years, with an industry association estimating another 500,000 at risk, amounting to one in four jobs in the sector. Researchers describe this as a new "China Shock," faster than the earlier wave that eliminated as many as 2.4m US jobs.
  • Will China Take Over the Global Auto Industry? — The global auto market has historically been regional, with most cars sold in a region also built there. Overcapacity in China's internal combustion sector, expanding electric-vehicle capacity, ample state bank credit, and a weaker yuan could concentrate global auto production in China absent restrictions such as the US 100% tariff on Chinese electric vehicles.

AI Summary. China's central bank set the renminbi's daily fixing rate just below 7.2 to the dollar, its weakest level in 18 months, signaling it may permit depreciation to offset US tariffs. Many economists believe Beijing will avoid a large devaluation because it would risk capital outflows and domestic instability.

Arjun Neil Alim, Thomas Hale and Joseph Cotterill Financial Times
Date Posted:

China fixed the renminbi at its weakest level in 18 months, suggesting it may allow currency depreciation to help offset the trade war. Devaluation risks acceleration of capital flight from China and could set off a round of competitive devaluations.

Is China allowing its currency to weaken to offset tariffs?

Core argument: The People's Bank of China set its renminbi fixing rate just below Rmb 7.2 per dollar, the weakest level since September 2023, in the first sign Beijing will permit depreciation to offset an escalating trade war with the US.

China has fixed the renminbi at its weakest level in 18 months in the first sign it will permit currency depreciation to offset an escalating trade war with the US. The People’s Bank of China weakened its fixing rate, the centre point of the band in which the currency is allowed to trade, to just below Rmb 7.2 a dollar on Tuesday. That is the lowest level since September 2023. Any significant renminbi depreciation would mark a serious escalation in global trade tension because other countries would come under pressure to mount competitive devaluations of their own. But many economists believe Beijing is unlikely to go that far because a renminbi devaluation would risk capital outflows and undermine economic stability at home. During Trump’s first term, China allowed the renminbi to weaken by more than 10% against the dollar in response to US tariffs imposed from 2018 onwards.

Takeaways by Macro Roundup® AI

  1. The People's Bank of China set its renminbi fixing rate just below Rmb 7.2 per dollar, the weakest level since September 2023, in the first sign Beijing will permit depreciation to offset an escalating trade war with the US.
  2. Significant renminbi depreciation would mark a serious escalation in global trade tension, as other countries would come under pressure to mount competitive devaluations of their own.
  3. Many economists believe Beijing is unlikely to go that far because devaluation would risk capital outflows and undermine domestic economic stability, though China allowed the renminbi to weaken by more than 10% against the dollar after US tariffs imposed from 2018.

Related Articles:

  • The Threat from China’s Capital Flight — Oddities in China's official balance of payments statistics suggest its actual current account surplus may be nearly 3x the reported figure, which would make it about as large relative to world output as it has ever been. The likeliest explanation for simultaneous downward pressure on the yuan is capital flight of roughly $500bn a year.
  • The Rise & Fall of Foreign Direct Investment in China — Net foreign direct investment into China has been negative for four consecutive quarters, as foreign investors shifted from reinvesting earnings from their Chinese operations to repatriating them. Whether this reflects cash management or signals a future slowdown in foreign direct investment is unclear, but the repatriation of profits is negative for China's currency.

AI Summary. Most U.S.-Mexico trade remains tariff-free under the U.S.-Mexico-Canada Agreement, though Mexico faces 25% tariffs on steel, aluminum, autos excluding U.S. content, and goods outside the agreement; Goldman Sachs estimates Mexico's overall tariff rate at about 8%. Autos account for a third of Mexico's manufactured exports, with nearly 3m vehicles shipped to the U.S. and 40% of U.S. auto parts supplied.

Anthony Harrup and Santiago Pérez Wall Street Journal
Date Posted:

While Mexico is facing a 25% levy on steel, aluminum, and non-U.S. content in cars, as of now most of its trade with the US will remain tariff-free under the US-Mexico-Canada Agreement.

Does Mexico retain a tariff advantage over Asian exporters?

Core argument: Goldman Sachs economist Alberto Ramos estimates Mexico's overall tariff rate will be about 8%, as most of its trade with the U.S. remains tariff free under the U.S.-Mexico-Canada Agreement.

While Mexico faces some tariffs most of its trade with America remains tariff free under the U.S.-Mexico-Canada Agreement. Mexico is subject to the 25% global tariff on steel and aluminum, and to the 25% levy on automobiles excluding the content made in the U.S. There are also 25% tariffs on goods that aren’t part of the USMCA, imposed on grounds that Mexico wasn’t doing enough to stop the flow of drugs and migrants to the U.S. That could be replaced with a 12% tariff for noncompliant exports once the Trump administration is satisfied that enough is being done to contain those flows. Goldman Sachs economist Alberto Ramos estimates that Mexico’s overall tariff rate will be about 8%. “Is it good? No. It’s bad. Is it the end of the world for Mexico? Certainly not,” he said. The auto sector, which accounts for a third of the country’s manufactured exports, remains a vital point of contention with the U.S. Mexico is the world’s fifth-largest automaker and sixth-largest exporter of vehicles. It shipped almost three million vehicles to the U.S. and supplied 40% of U.S. auto parts last year. Close to two million Mexicans work in the industry, with exports last year close to $200 billion.

Takeaways by Macro Roundup® AI

  1. Goldman Sachs economist Alberto Ramos estimates Mexico's overall tariff rate will be about 8%, as most of its trade with the U.S. remains tariff free under the U.S.-Mexico-Canada Agreement.
  2. Mexico faces the 25% global tariff on steel and aluminum, a 25% levy on automobiles excluding U.S.-made content, and 25% tariffs on non-USMCA goods that could be replaced by a 12% tariff for noncompliant exports if the Trump administration is satisfied with efforts to contain drug and migrant flows.
  3. Mexico's auto sector accounts for a third of its manufactured exports, employs close to two million people, and supplied almost three million vehicles and 40% of U.S. auto parts to the U.S. last year, with exports close to $200 billion.

Related Articles:

  • A Wonkish Note on Trade with Canada and Mexico — Canadian oil is shipped to the midwestern United States because pipelines make it a nearby market, while North American manufacturing, especially autos, relies on an integrated just-in-time production system in which lower-wage Mexico specializes in labor-intensive stages. These exports, which account for the bilateral trade deficits, make America richer by lowering energy costs and making U.S. manufacturing more competitive.
  • Mexico Nearshoring Yet to Yield Big Investment Despite Global Trade Tensions — Foreign-held assets in Mexico, including foreign direct investment, have declined relative to Mexico's GDP, with new foreign direct investment falling to a 10-year low despite attention to nearshoring. Reinvested earnings now make up most inflows, and manufacturing absorbed nearly half of total foreign direct investment.
  • Analysis: Chinese Cars Pour In To Mexico, Rattling The USMCA — Mexico's 2020 decree cutting car import tariffs from 20% to 0% has been followed by a surge of Chinese vehicles, with China shipping close to 500,000 cars to Mexico this year and displacing the United States as Mexico's top supplier. One in three new cars sold in Mexico this year will be built in China, up from 4% in 2020.

Wednesday, April 9, 2025

AI Summary. The US paused higher reciprocal tariffs on dozens of trade partners for 90 days, lowering the rate to a 10% baseline, while raising duties on Chinese imports to 125%. The reversal followed market turmoil and recession fears after the higher duties took effect, and pressure from business leaders and investors.

Skylar Woodhouse Bloomberg
Date Posted:

The USA paused tariff implementation above 10% for 90 days “on dozens of trade partners” that have not “retaliated” or balked at negotiations, while raising duties on China to 125%, in retaliation for its “refusal to negotiate.”

Did market turmoil prompt a pause on higher tariffs for most countries?

Core argument: Trump announced a 90-day pause on higher reciprocal tariffs for dozens of trade partners, lowering their rate to the 10% baseline, roughly 13 hours after higher duties on 56 nations and the European Union took effect.

President Donald Trump said he would pause higher reciprocal tariffs for 90 days on dozens of trade partners, while raising duties on China to 125%. The president’s about-face comes roughly 13 hours after higher reciprocal duties on 56 nations and the European Union went into effect, a move that fueled market turmoil and stoked recession fears. The president came under massive pressure from business leaders and investors to reverse course. “I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately,” Trump posted on social media. It wasn’t immediately clear which nations would receive tariff relief. Those who do would still be taxed at the 10% baseline rate that went into effect on Saturday. Trump said that more than 75 countries had contacted his administration to negotiate on trade barriers and “have not, at my strong suggestion, retaliated in any way, shape, or form.” Trump also said he was raising rates on China over its refusal to negotiate. The president had previously imposed a 104% charge on Chinese imports, which Beijing responded to with a 84% charge on American goods.

Takeaways by Macro Roundup® AI

  1. Trump announced a 90-day pause on higher reciprocal tariffs for dozens of trade partners, lowering their rate to the 10% baseline, roughly 13 hours after higher duties on 56 nations and the European Union took effect.
  2. Trump raised duties on Chinese imports to 125% over Beijing's refusal to negotiate, up from a previously imposed 104% charge, which China had answered with an 84% charge on American goods.
  3. Trump's about-face followed market turmoil and recession fears and pressure from business leaders and investors, and he said more than 75 countries had contacted his administration to negotiate without retaliating.

Related Articles:

  • The Evolution of Global Trade in 2024 — Global trade imbalances consist of one very large surplus and one very large deficit: China's goods surplus exceeds $1tn a year, while the U.S. non-petroleum deficit drives the Asian surplus. The author argues a Chinese surplus this large can be sustained only alongside a large U.S. deficit.
  • China’s Stunning 2024 Export Growth — Chinese export volumes are up 13% year-over-year while import volumes are up only 2%, a gap that with exports at about 20% of GDP implies a net exports contribution to Chinese growth of close to 2% of GDP. Falling Chinese export prices mean export volumes are growing much faster than the dollar value of exports.
  • How German Industry Can Survive the Second China Shock — The European Union has 30mm manufacturing jobs, and China has grown from a $4tn economy producing under 15% of global manufacturing output to an $18tn economy producing over a third, with well over 50% of global capacity in many sectors. European tariffs on Chinese electric vehicles limit import competition but do not offset lost export markets.

AI Summary. China imposed an 84% tariff on all imports from the US, hours after US duties on Chinese goods reached 104%. Goldman Sachs economists estimate that for 36% of US imports from China, American buyers have limited ability to find alternative suppliers even with substantial tariffs.

Bloomberg Staff Bloomberg
Date Posted:

A Goldman Sachs analysis finds that American firms will have a “limited ability” to find alternative suppliers for 36% of American imports originating in China.

Can American buyers replace Chinese imports when tariffs rise sharply?

Core argument: China's Finance Ministry said it will impose an 84% tariff on all US imports starting April 10, hours after US duties on Chinese goods reached 104% this year with the steepest American tariff in a century taking effect.

The Chinese government will impose an 84% tariff on all imports from the US starting April 10, the Finance Ministry said in a statement Wednesday. China’s move came hours after America’s steepest tariff in a century went into force, taking Trump’s duties on Beijing this year to 104%. While Trump’s tariffs have piled pressure on the Chinese export machine that last year contributed to about a third of growth, the US economy is also at risk. Goldman Sachs economists including Andrew Tilton wrote in a note that for 36% of US imports from China, American buyers have a “limited ability” to find alternative suppliers, even with substantial tariffs.

Takeaways by Macro Roundup® AI

  1. China's Finance Ministry said it will impose an 84% tariff on all US imports starting April 10, hours after US duties on Chinese goods reached 104% this year with the steepest American tariff in a century taking effect.
  2. Goldman Sachs economists including Andrew Tilton wrote that for 36% of US imports from China, American buyers have a "limited ability" to find alternative suppliers, even with substantial tariffs.
  3. China's export machine, which contributed to about a third of the country's growth last year, faces added pressure from Trump's tariffs, while the US economy is also at risk.

Related Articles:

  • Trump’s Tariffs and China Collide to Shock the $115 Trillion Global Economy — Bloomberg Economics projects that if US tariffs stand and targeted countries retaliate with duties half as large, US goods imports would be about 30% lower by 2030 than otherwise, with China's exports to the US falling 85%. China is expected to redirect most of those exports to other markets, amplifying pressure on economies already losing US sales.
  • China Offers First Hint of Devaluation With Weak Renminbi Fix — China's central bank set the renminbi's daily fixing rate just below 7.2 to the dollar, its weakest level in 18 months, signaling it may permit depreciation to offset US tariffs. Many economists believe Beijing will avoid a large devaluation because it would risk capital outflows and domestic instability.
  • Why the Dollar is Depreciating Today — Trade restrictions strengthen the dollar all else equal, so the dollar's depreciation after new tariffs is best explained by reduced investor confidence in the U.S. economic outlook. That same loss of confidence is reflected in U.S. stocks declining relative to foreign markets and risks an unwinding of overweight positions in U.S. assets.

AI Summary. A $39bn auction of 10-year U.S. Treasury notes drew strong investor demand, lifting bond prices and paring a rise in yields. Investors had feared a weak auction would deepen the selloff amid concerns that aggressive U.S. tariff actions could shrink foreign demand for Treasuries.

Sam Goldfarb Wall Street Journal
Date Posted:

A $39B auction of 10-year Treasuries Wednesday was met with strong demand; yields fell to 4.35% from over 4.5% overnight.

Is foreign demand for Treasuries holding up despite tariff concerns?

Core argument: A $39 billion auction of 10-year U.S. Treasury notes drew strong investor demand, lifting bond prices and paring the rise in Treasury yields.

Bond prices are rebounding after a much-anticipated $39 billion government auction of 10-year U.S. Treasury notes met with strong demand from investors. Treasury yields, which rise when bond prices fall, have surged this week, raising fears among investors that a bad auction would intensify the selloff. Investors have been concerned that foreign demand for Treasuries could shrink in response to President Trump’s aggressive tariff actions.

Takeaways by Macro Roundup® AI

  1. A $39 billion auction of 10-year U.S. Treasury notes drew strong investor demand, lifting bond prices and paring the rise in Treasury yields.
  2. Treasury yields surged, leaving investors concerned that a weak 10-year auction would intensify the selloff in government bonds.
  3. Investors have worried that foreign demand for U.S. Treasuries could shrink in response to President Trump's aggressive tariff actions.

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AI Summary. US Treasury yields rose sharply, with the 10-year yield climbing to 4.51% before easing to 4.35% and the 30-year briefly above 5%, as investors shifted out of low-risk assets into cash amid tariff-driven volatility. Investors and analysts attributed the sell-off partly to hedge funds unwinding trades that exploit price gaps between Treasuries and futures or interest rate swaps.

Arjun Neil Alim, Harriet Agnew, Costas Mourselas and Kate Duguid Financial Times
Date Posted:

The 10-year US Treasury yield, at 3.9% earlier this week, jumped to 4.51% before falling back to 4.35% while the 30-year briefly rose above 5%, “the latest signs of investors moving out of low-risk assets and into cash.”

Are investors abandoning Treasuries as a safe haven?

Core argument: The 10-year US Treasury yield jumped to 4.51% before easing to 4.35%, up 0.19 percentage points on the day and rising from below 3.9% earlier in the week, while the 30-year yield briefly topped 5%.

The 10-year US Treasury yield jumped to 4.51% before falling back to 4.35% — up 0.19 percentage points on the day — while the 30-year yield briefly rose above 5%. The 10-year yield has risen from less than 3.9% earlier this week. The sell-off is the latest sign of investors moving out of low-risk assets and into cash, as Trump’s tariffs on major trading partners spark intense volatility in markets. Investors and analysts pointed to the misfiring of popular trades that aim to exploit differences in price between Treasuries and associated futures contracts, known as the “basis trade”, or between Treasuries and interest rate swaps. As hedge funds cut back on risk and exit those trades, they have been selling Treasuries, piling pressure on markets. In another sign of stress in markets, spreads between Treasury yields and interest rate swaps have widened sharply.

Takeaways by Macro Roundup® AI

  1. The 10-year US Treasury yield jumped to 4.51% before easing to 4.35%, up 0.19 percentage points on the day and rising from below 3.9% earlier in the week, while the 30-year yield briefly topped 5%.
  2. Investors and analysts pointed to the misfiring of trades exploiting price differences between Treasuries and futures contracts, known as the "basis trade", or between Treasuries and interest rate swaps, with hedge funds selling Treasuries as they cut risk.
  3. Spreads between Treasury yields and interest rate swaps have widened sharply, a sign of market stress, as Trump's tariffs on major trading partners spark volatility and investors move out of low-risk assets into cash.

Related Articles:

  • What Is the Basis Trade? — The Treasury basis trade — leveraged hedge fund bets, sometimes up to 100x, on convergence between Treasury cash and futures prices — stands at roughly $800bn within $2tn of outstanding prime brokerage balances. An exogenous shock could force a rapid unwind of these positions, disrupting broker-dealer market functions.
  • The World Is Finding a Plausible Alternative to Treasuries — Rising German and Japanese 10-year government bond yields—around 2.66% and 1.25%—make those markets more attractive than US Treasuries for European and Japanese investors who hedge their dollar exposure, potentially shifting allocations toward home markets. Foreign investors own about a third of the Treasury market, mostly in longer maturities.
  • Germany’s Spending Push Drives Up Borrowing Costs Across Eurozone — Germany's planned defence spending has pushed 10-year German government bond yields close to 3%, lifting borrowing costs across the eurozone because German debt serves as the bloc's benchmark. Investors warn this intensifies pressure on heavily indebted economies; one simulation projects Italy's debt-to-GDP ratio reaching 153% and France's 122% by 2030 absent spending cuts or faster growth.

AI Summary. West Texas Intermediate crude near $57 sits below the price US oil executives say new wells need to break even, according to a Federal Reserve Bank of Dallas survey, discouraging them from expanding supply. S&P Global Commodity Insights projects $50 oil could cut output by over 1m barrels a day.

Kevin Crowley, David Wethe, and Emma Sanchez Bloomberg
Date Posted:

Crude is hovering under the $65 breakeven level a Dallas Fed survey of producers suggests is needed to sustain new production. If the price were to fall below $50, output in the ”lower 48 states” could drop by 1mm bpd, 7% of the current US total.

Are oil prices now too low for US producers to expand supply?

Core argument: West Texas Intermediate crude has fallen about 27% since Trump's inauguration to roughly $57 a barrel, below the breakeven level executives say new wells require, according to a Federal Reserve Bank of Dallas survey.

The growing unease reflects how Trump’s effort to re-write global trade rules is undermining his goal to supercharge US fossil-fuel production and achieve “energy dominance.” Executives are loathe to boost US oil supply with West Texas Intermediate down about 27% since Trump’s inauguration less than three months ago. It’s now hovering around $57, below the level they say they need for new wells to break even, according to a survey by the Federal Reserve Bank of Dallas. If prices fall to $50 a barrel, production in the Lower 48 states could drop by more than 1 million barrels a day over the next 12 months, according to S&P Global Commodity Insights. That’s about 7% of the current US total.

Takeaways by Macro Roundup® AI

  1. West Texas Intermediate crude has fallen about 27% since Trump's inauguration to roughly $57 a barrel, below the breakeven level executives say new wells require, according to a Federal Reserve Bank of Dallas survey.
  2. S&P Global Commodity Insights estimates that if oil falls to $50 a barrel, Lower 48 production could drop by more than 1 million barrels a day over the next 12 months, about 7% of the current US total.
  3. Trump's effort to re-write global trade rules is undermining his goal of supercharging US fossil-fuel production and achieving "energy dominance," with Texas oil executives reluctant to boost supply at current prices.

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