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On April 29, US President Donald Trump will hold a rally in Michigan to commemorate his first 100 days in office. Choosing Macomb County, a significant region for the US automotive industry, is a deliberate move to galvanise support for his “Make America Great Again” (MAGA) vision of revitalizing American manufacturing and protecting domestic jobs that resonate with his core supporters.
Hence, Trump’s decision to roll back specific auto sector tariffs appears strategically timed to coincide with his 100-day milestone to showcase his responsiveness to industry concerns. Despite the 3.8% rebound in the S&P 500 Index this week, it is still down 10.8% from its all-time high on February 19. The tariff exemptions on certain auto parts have been explicitly temporary, as are those on technology products such as smartphones and laptops. The 25% tariff on foreign-made cars will still take effect on May 3.
To project a more market-friendly image, Trump also softened his tone on Fed Chair Jerome Powell, stating he has “no intention” of firing him. However, the US Treasury 10Y bond yield remains supported at 4.30% while the DXY Index is still capped at 100, with investors unconvinced that Trump would end his threat to the Fed’s independence and the USD’s global status. Trump will likely resume his criticism of Powell if the Fed keeps interest rates unchanged at the May 7 FOMC meeting, especially as his administration pushes to finalize the fiscal bill extending his 2017 tax cuts by Independence Day.
Neither is China convinced by Trump’s gesture to be “very nice” to de-escalate the ongoing trade war with China, suggesting that the high tariffs on Chinese imports would “come down substantially” contingent on a trade deal. China was determined not to be drawn into trade talks until the Trump administration agreed to dialogue based on mutual respect and equity and meet its prerequisite to lift US tariffs. The US trade negotiations with Japan and South Korea are progressing slowly, with definitive agreements elusive, leaving uncertainty about the 90-day pause on US reciprocal tariffs set to expire in July.
Overall, investors remain sceptical. Trump’s conciliatory gestures this week could not erase the past couple of months of heightened market volatility driven by his sudden policy reversals and the use of policy uncertainty as a negotiating tool. There is a need to monitor how Trump’s policies are broadening beyond immediate trade worries, prompting global investors to re-evaluate the US as a stable investment destination. The Norwegian Government Pension Fund Global, the world’s largest sovereign wealth fund, reported a USD40 loss in the first quarter due to negative returns in the tech sector driven by US trade policies. The Financial Times reported that China’s state-backed investments have paused investments in US-based private equity companies due to the US-China trade war.
Quote of the Day
“I’m not upset that you lied to me. I’m upset that from now on I can’t believe you.”
Friedrich Nietzsche
April 25 in history
Bell labs announced the first solar battery made from silicon in 1954.
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