Additional US tariffs paused for 90 days

President Trump announced a 90-day pause in the imposition of addition tariffs, for nations which did not retaliate with their own reciprocal tariffs. This leaves tariffs on exports to the US at 10% for most nations. A notable exception is China, where the President raised tariffs once more, to reach 125%. This was a reaction to an earlier announcement from Chinese officials, indicating that tariffs on US goods entering the country would be increased to 84%. Reports suggest that Chinese officials will meet today to discuss additional stimulus measures, with support for households and technological innovation, in response to US tariffs.

Minutes from the FOMC meeting, held on 18 and 19 March, suggest that most committee members were concerned about the potential for a more permanent rise in inflation as a result of tariffs. That narrative is consistent with the upward revision seen in the Fed’s inflation projections at the time. Despite these concerns committee members still judged that they were “well positioned” to take a wait-and-see approach before making further cuts to rates.

Chinese consumer price inflation fell once again in March, declining 0.1% y/y. Although this represents an improvement on the 0.7% y/y decline seen in February, the change appears to have largely been driven by base effects rather than a material change in demand. There was also continued deflation in producer prices, which fell 2.5% y/y in March, from 2.2% in February.

Today’s Economic Data and Events

• 16:30 US CPI (March). Forecast: 2.5% y/y
• 16:30 US initial jobless claims (w/e 5 April). Forecast: 224k

Fixed Income

• There was marked volatility in US treasury markets on Wednesday, as President Trump announced a 90-day pause on additional tariffs. The yield on the 2yr UST jumped sharply, increasing 18bps, to reach 3.9077%, while the 10yr yield rose 4bps to 4.3315%.
• Moves in European bond yields were mixed once again. The 10yr Gilt yield rose markedly, rising 17bps to 4.778%, while the 10yr Bund yield fell 4bps to 2.589%.

FX

• Moves in major peer currencies against the dollar were mixed on Wednesday, with the dollar spot index ending the day marginally weaker (-0.05%). EURUSD fell by less than 0.1% to 1.0949, GBPUSD rose 0.43% to 1.282. USDJPY rose 1.0% to 147.76.
• Commodity currencies strengthened sharply against the dollar on Wednesday. AUDUSD rose 3.2% to 0.6153, NZDUSD gained 2% to close at 0.5644, and USDCAD fell 1.3% to reach 1.4082.

Equities

• US equity markets rallied on news of the pause in additional tariffs. The S&P 500 saw its biggest one-day rise since 2008, increasing 9.5%. The Dow Jones rose 7.9% and the NASDAQ climbed by 12.16%.
• European equity markets ended Wednesday lower. The Euro Stoxx 50 fell 3.2%, the CAC40 declined 3.3% and the DAX dropped by 3%. The FTSE 100 fell 2.9%.
• Regional markets were mixed on the day. The DFM ended the day 0.05% higher, while the ADX gained 1.2%. The Tadawul fell 1.82%.

Commodities

• Oil futures rebounded on Wednesday, as plans for additional tariffs were temporarily paused. Brent futures rose 4.2% to USD 65.48/b, and WTI gained 4.6% to USD 62.35/b. EIA data showed US crude inventories rose by 2.55m barrels last week, their highest levels since July 2024.