Trump Declines to Soften Tariffs With US-China Trade Talks set to Begin

Economic

China–U.S. Trade War

Summary:

Trump's comments came as top US officials and their Chinese counterparts are scheduled to meet in Switzerland this weekend to hold trade discussions.

President Trump told reporters on Wednesday he would not pull back tariffs on Chinese goods in order to get China to the negotiating table, countering speculation that he might lower hefty 145% tariffs to break the ice.

Trump's comments came as top US officials and their Chinese counterparts are scheduled to meet in Switzerland this weekend to hold trade discussions, boosting hopes for a potential deescalation in the US-China trade war.

Treasury Secretary Scott Bessent and trade representative Jamieson Greer will meet with Chinese Vice Premier He Lifeng in the most senior-level talks since Trump's tariff push launched in early April.

Trump said earlier this week that he has no plans to speak to China's Xi Jinping, though he had suggested recently that he would be willing to soften the tariffs on imports from China.

“At some point, I’m going to lower them, because otherwise, you could never do business with them, and they want to do business very much,” Trump said on NBC’s Meet the Press last weekend. But has more recently claimed that "we're losing nothing" by declining trade with Beijing.

Meanwhile, China has reportedly compiled a list of US goods exempt from its 125% tariffs, aiming to ease trade tensions without making public concessions.

Trump has defended the 145% tariffs on Chinese imports, claiming China "deserves it" and would likely absorb the costs. But those comments contrast with efforts inside the administration to consider phased tariff reductions and revive trade talks.

But Trump also put the onus on other countries to make deals after meeting with Canadian Prime Minister Mark Carney at the White House on Tuesday,

"We don't have to sign deals," he said. "They have to sign deals with us. They want a piece of our market. We don't care about their market."

On other fronts, Trump hinted that duties on pharmaceutical imports could be next in the pipeline. On Monday, he said he would determine those tariff rates over the next couple of weeks. The possible headwind for the sector comes as more companies have noted the early impact of the tariffs, with Ford (F) among the latest to pull its guidance and warn of a "significant" hit to its business.

And in another wrinkle in his multipronged trade war, Trump late Sunday threatened a 100% tariff on foreign-made movies, though he didn't provide details.

Source: Yahoo Finance

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Damon

Central Bank

The economy overall has "continued to expand at a solid pace," the Federal Open Market Committee said in a policy statement, attributing a drop in first-quarter output to record imports as businesses and households rushed to front-run new import taxes. The labor market remained "solid" and inflation was still "somewhat elevated," it said.

The direction of policy will depend on which of those risks develop, or, in the more difficult outcome, whether inflation and unemployment increase together and force the Fed to choose which risk is more important to try to offset with monetary policy.

MARKET REACTION:

STOCKS: The S&P 500 (.SPX), opens new tab turned 0.46% lower

BONDS: The yield on benchmark U.S. 10-year notes fell to 4.2655%. The 2-year note yield fell to 3.762%

FOREX: The dollar index turned 0.067% lower and the euro pared a loss to -0.12%

COMMENTS:

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“No surprises, the Fed leaving rates unchanged. I guess there's a sense of perhaps the Fed is talking, hinting at stagflation, and of course, uncertainties over the tariffs.”

“I would say this statement is a little bit more hawkish than I expected.”

“This Fed meeting was marked by a lot of uncertainties and a firm resolution to stay the course until the Fed has more information about the inflationary impact from tariffs.”

JAMIE COX MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND VIRGINIA

"The Treasury has supplanted the Fed for market moving news these days—and that’s a good thing. The Fed is actually where it communicated to markets it would be - attentive to the risks posed by tariffs and would be on hold until smoke clears."

JULIA HERMANN, GLOBAL MARKET STRATEGIST, NEW YORK LIFE INVESTMENTS, NEW YORK, NY

"Their ability to preemptively cut rates to shore up economic growth is constrained by upside inflation risks, and then, conversely, their ability to preemptively hike rates to reduce inflation risk is constrained by downside risk to growth. So, it's a stagflation conundrum for the Fed. Where it results, in terms of Fed policy, is that we expect the Fed to stay on hold or as long as possible."

"That means that we disagree with the cumulative market consensus that comes out of Fed Funds Futures, where consensus is that we will see meaningful rate cuts in the back half of the year. We do not expect that. We expect to see meaningful easing from the Fed only in the scenario that economic growth figures really disappoint."

"It is a pretty clear market expectation that everyone, including the Federal Reserve, has to be in a bit of wait and see mode until the 90-day tariff pause ends."

SEEMA SHAH, CHIEF GLOBAL STRATEGIST, PRINCIPAL ASSET MANAGEMENT (in email)

"The Fed has been plunged into an almost impossible situation whereby its two mandates will likely move in opposite directions, but government policy – which is incredibly uncertain itself - will dictate both the timing and magnitudes of those moves. Certainly, the recent Trump headline suggesting an already hardline approach to China tariff negotiations, further reinforces the uncomfortable position for the Fed. In this situation, what else can the Fed do but sit on its hands? Rate cuts will be required but, increasingly, it seems that the Fed will need to wait until late Q3 before the window of opportunity opens."

ASHISH SHAH, CIO PUBLIC INVESTING, GOLDMAN SACHS ASSET MANAGEMENT, NEW YORK

“For the time being the Fed remains in a holding pattern as it waits for uncertainty to clear. Recent better-than-feared jobs data has supported the Fed’s on-hold stance, and the onus is on the labor market to weaken sufficiently to bring a resumption of its easing cycle. Any weakening in the labor market, however, could take a number of months to become apparent and we see the odds skewed towards another ‘hold’ at next month’s meeting.”

MICHELE RANERI, VICE PRESIDENT AND HEAD OF U.S. RESEARCH AND CONSULTING, TRANSUNION, CHICAGO (in email)

"This (Fed's move) was likely a result of high inflation and other recent economic trends, such as the strong April jobs report. While the possibility still exists for potential rate cuts later this year, the economic picture is complicated, and it's too early to know if or when those cuts might happen.

"We're starting to see some positive signs in lending - mortgages, home equity loans, and auto financing are showing signs of life after a slow couple of years. However, these gains will likely remain incremental until rates begin ticking down, as many borrowers are reluctant to take on a loan at today’s rates, particularly if they currently have a loan at a significantly lower rate.”

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN

"The Fed statement was a statement of the obvious. They gave roughly equal air time to the threats to growth and inflation, so that tells us we need to wait and see how the data shake out between now and the June meeting before deciding whether they're going to prioritize keeping inflation expectations contained or to address any hit to growth. The Fed isn't being complacent, twiddling their thumbs, they're like the rest of us: monitoring things vigilantly."

Source: Reuters

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Adam

Commodity

The gold market’s unprecedented run at all-time highs continues to dominate and transform the mining sector, as the world’s second-largest gold producer reported a solid start to the year.

On Wednesday, ahead of the North American open, Barrick Mining Corporation (NYSE: GOLD)(TSX: ABX) reported first-quarter net earnings of $474 million, or $0.27 per share, and adjusted net earnings of $603 million, or $0.35 per share, beating expectations. According to consensus forecasts, analysts had expected EPS of around $0.28.

The company said its net earnings per share increased 59% year-on-year, with adjusted net earnings per share growing by 84% compared to the first quarter of 2024.

“Operating cash flow of $1.2 billion was also up 59%, while free cash flow of $375 million improved materially compared to Q1 2024, driving a net debt reduction of 5% over the quarter,” the company said.

With its solid cash flow growth, the company approved a quarterly dividend of $0.10 per share. Barrick also said it would repurchase $143 million of its shares, consistent with its commitment to shareholder returns.

Barrick’s solid balance sheet was driven primarily by higher gold prices. The company reported a realized average gold price of $2,898 during the first three months of the year, up 40% from prices seen last year.

Barrick said gold production came in at the top end of guidance. The company produced 758,000 ounces of gold in the first quarter, down 19% from last year. However, copper production continues to increase; Barrick produced 44 tonnes of copper between January and March, up 10% compared to the first quarter of 2024.

“At Reko Diq and Lumwana, owner teams have been mobilized, long-lead items secured, and Fluor and Hatch appointed as engineering partners, respectively. These projects will materially grow Barrick’s copper and gold production and support our goal to organically grow our gold-equivalent ounces by 30% by the end of the decade. We also progressed with the Pueblo Viejo ramp-up and tailings expansion—critical to unlocking its full value—and transitioned Fourmile to prefeasibility with 16 rigs now active, targeting high-confidence, substantial resource additions,” said President and CEO Mark Bristow in the earnings report.

While the company continues to see robust production, it is coming with increased costs. Barrick said its gold cost of sales rose to $1,629, up 14% from last year. Meanwhile, all-in sustaining costs (AISC) rose to $1,775 an ounce, up 20% from last year.

However, the company expects costs to fall throughout the year as it ramps up production.

In the report, Bristow said the first quarter highlighted Barrick’s distinct approach to growth.

“We’ve built a global mining company with the financial strength, technical capacity, and operational depth to grow organically. Our performance this quarter reflects delivery across all our strategic pillars—from reserve replacement and portfolio optimization to the ramp-up of world-class projects and reinvestment in exploration.”

Bristow also said the company continues to invest in exploration and the organic growth of its deposits.

“While others pursue shortcuts through M&A, we continue to invest in our own future—by building and not just buying—thereby creating real value for our shareholders. With no need to raise new equity or increase debt to fund our growth, Barrick remains uniquely well-positioned to maintain a strong balance sheet while delivering sustainable returns and long-term value for shareholders,” he said.

Barrick also highlighted its $1 billion sale of its 50% stake in the Donlin project in Alaska.

Source: kitco

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Thomas

Economic

The economy overall has "continued to expand at a solid pace," the Fed said in a policy statement, attributing a drop in first-quarter output to record imports as businesses and households rushed to front-run new import taxes.

The labor market also remained "solid" and inflation was still "somewhat elevated," the central bank's policy-setting Federal Open Market Committee said, repeating the language used in its previous statement.

But the latest statement highlighted developing risks that could leave the Fed with difficult choices in coming months.

"Uncertainty about the economic outlook has increased further," the FOMC said at the end of a two-day meeting during which officials agreed unanimously to keep the central bank's benchmark interest rate steady in the 4.25%-4.50% range.

"The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen," the statement said.

A weaker job market would typically strengthen the case for rate cuts; higher inflation would call for monetary policy to remain tight.

The Fed's policy rate has been unchanged since December as officials struggle to estimate the impact of President Donald Trump's import tariffs, which have raised the prospect of higher inflation and slower economic growth this year.

With policy unchanged and no new economic projections issued, it will fall to Fed Chair Jerome Powell to elaborate on the meeting and the outlook in a press conference at 2:30 p.m. EDT (1830 GMT).

When policymakers last updated their economic and policy projections in March, they anticipated reducing the benchmark rate by half a percentage point by the end of this year.

Source: Reuters

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Adam

Economic

Market uncertainty caused by U.S. President Donald Trump's erratic policymaking and aggressive stance on tariffs hung heavily over an investor gathering in Los Angeles this week, with many saying it is time to pivot to non-U.S. assets for more clarity.

Concerns over the U.S. economic trajectory, and growing chances of an imminent recession fueled by White House trade policies were major topics at the Milken Institute Global Conference in Beverly Hills, California, where Wall Street dealmakers and global investors gathered to raise capital, sell companies and get a handle on the industry's mood.

On panels and in more than a dozen private interviews on Monday and Tuesday, attendees said the U.S. economy's size and depth of its capital markets left few viable alternatives for a dramatic shift away from American assets. Many, however, said the volatility was pushing them to consider higher allocations to non-U.S. markets, Europe in particular.

"We've spent a lot of time focused on the U.S. and Europe, and historically, we have had a little bit of a bias towards the U.S.," said Purnima Puri, governing partner at HPS Investment Partners, a New York-based credit investment firm.

"We do think Europe is starting to look significantly more interesting, and that's a market we're spending time on," she said on stage at the conference on Tuesday.

Entrepreneur Andre Loesekrug-Pietri elicited grins and pats on the back as he walked the halls sporting a green baseball cap with the words "Make Europe Great Again," in a tongue-in-cheek poke at Trump's red "Make America Great Again" hats.

While many downplayed the risk of capital outflows from the U.S. that spooked markets in the immediate aftermath of Trump's tariff announcement last month, the search for alternative geographies was a major theme at the event.

Some bankers characterized it as a chance to diversify portfolios with too much U.S. exposure, particularly earlier this year and late last year, when the market was betting Trump's second presidency would boost the economy through deregulation and tax cuts.

Contributing to the shift are Europe's improved growth prospects and lower asset valuations.

"At the start of the year, I think the view was that the U.S. was the place to be, and that's where capital is going to flow, and ... that has shifted differently," said Lee Kruter, partner and head of performing credit at GoldenTree Asset Management, speaking on stage.

"In the first quarter we looked for opportunities in Europe," he added, citing better growth prospects and lower risks of stagflation than the U.S.

Several senior bankers and investors said western Europe is the obvious place to invest in but it could have challenges as well.

U.S. Treasury Secretary Scott Bessent sought to calm event attendees, noting in a speech on Monday that betting against America was a time-tested mistake.

But concerns over a tariff-induced slowdown and a prolonged trade war with China have kept investors on edge.

Several bankers said in interviews that the market's current enthusiasm may be premature and that it would take little, like a comment from China on stalling trade talks, to send stocks lower again.

Saira Malik, chief investment officer at Nuveen, said non-U.S. assets could continue to do better as long as tariff uncertainty persists, but over the long-term U.S. assets could outperform other geographies again, with the tech sector being a major driver.

FINANCING US DEBT

A less urgent but also prominent concern was the U.S. fiscal outlook, with the prospect of rising government debt feeding doubts over the long-term safety of U.S. assets.

"I believe that the underlying foundation of the dollar and Treasury market has been eroding over the last number of years, and we better pay attention to it pretty soon," Alan Schwartz, executive chairman at Guggenheim Partners, warned on a panel on Monday.

Steven Mnuchin, founder and managing partner of Liberty Strategic Capital, said the U.S. dollar had no alternative as the global reserve currency.

"With that comes a level of responsibility," the former U.S. Treasury secretary in Trump's first administration said at the event on Monday.

"It is very important for us to keep the dollar as the reserve currency of the world, because if people don't view that, then we're going to have an even bigger problem financing our debt."

Source: finance.yahoo

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Adam

Commodity

Oil slumped as geopolitical tensions from Yemen to Iran showed signs of easing and traders searched for clues on the US Federal Reserve’s policy outlook.

West Texas Intermediate futures dipped by more than 1% to trade below $59 a barrel, after briefly topping $60. US President Donald Trump said the US would stop its bombing campaign against Houthis in Yemen after a ceasefire was facilitated by Oman. That followed earlier comments from Vice President JD Vance that a nuclear deal with Iran could see the OPEC member reintegrated into the global economy.

In the US, the Federal Reserve is expected to keep rates steady in their meeting Wednesday. Traders are awaiting comments by Chair Jerome Powell for insight into whether Trump’s trade and economic policies are changing the agency’s view on the pace of rate cuts.

Prices failed to sustain an earlier rally on news that US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer will meet with Chinese officials in Switzerland later this week, the first confirmed discussions since Trump imposed sweeping tariffs. Beijing also cut its policy rate to fortify its economy in the face of reciprocal tariffs.

“There is a fear that the trade negotiations in Switzerland with China could backfire and turn into a demand destruction event,” said Robert Yawger, director of the energy futures division at Mizuho Securities USA. Building market sentiment that a rate-cut is not in the cards anytime soon is also weighing on prices, he added.

Oil has trended lower since late January due to escalating trade frictions and plans by OPEC+ to keep boosting idled supply, but prices have moved away from their lows in the last couple of days.

The decline in crude prices will likely lead to falling American shale output, according to Diamondback Energy Inc., the largest US independent oil producer in the Permian Basin. In another sign of the hit to output, the Energy Information Administration cut its forecast for US crude production this year for a second straight month.

Source: finance.yahoo

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Owen Li

Central Bank

LPL Financial Chief Economist Jeffrey Roach said in an assessment he made on the Yahoo Finance program Morning Brief that this week’s meeting will most likely be “boring.” Roach said that Fed officials will prepare markets for the first rate cut in June with domestic and international speeches they will make during this process.

Roach said he expects three interest rate cuts during the year, adding that these could be quarter-point cuts in June, October and December, respectively. He noted that there are positive signals, especially in non-housing services inflation, which is called “super core.”

Roach also made assessments of employment data, stating that the latest figures do not fully reflect the truth and that some temporary hirings (such as in the warehousing sector) make the picture look stronger than it is. He also pointed out that the data could be misleading because federal employees are still on the payroll due to severance pay or early retirement.

However, Roach said that the persistent demand for labor in the health sector provides stability to the labor market, and that the general trend is a slowdown in employment growth over the last year and a half but still positive. He added that as long as the average employment growth remains above 125,000, the message of stability will continue to be given to the markets.

Roach said that businesses tend to hold on to their current employees because of the difficulties they face in finding qualified workers, and that this could limit layoffs. However, he also noted that wage increases could slow down.

Noting that there has been a rapid increase in the number of people unemployed for a long time, Roach added that this rate has reached pre-pandemic levels but does not yet show signs of recession. For this reason, he stated that the markets reacted positively to the employment data announced last Friday.

According to Roach's assessment, the Fed will not change interest rates this week, but will begin to lay the groundwork for a possible cut in June.