The more dovish disposition has been echoed recently by some market analysts and politicians hopeful for a thaw in the still-worsening US-China trade war. That’s a big change in their viewpoints. Just last week, Bessent, one of the President’s top economic advisers, called the current course of the trade conflict “unsustainable.” He expects a de-escalation in tensions between the two economic powerhouses, which may just be the first sign that a turning point in negotiations is on the way.
Bessent’s sentiments were seconded by none other than President Trump himself, who added fuel to the fire with the suggestion that a big, beautiful resolution is coming soon. He was right, of course, when he admitted that the tariffs he raised on China would never be fully rolled back. He implied that a deep cut was within reach. Trump wants Americans to think that these tariffs are going to drop dramatically. The Wall Street Journal noted recently they could drop to as low as 50-65%.
This playing down of trade tensions could not have come at a more crucial moment. Tariffs are causing significant disruptions to the US economy, according to economists’ forecasts. A mild annualized contraction seems almost inevitable, mostly due to the front-loading of imports ahead of tariff implementation. The experts say we can prevent a sudden and dramatic drop in our nation’s economic performance. A lot of this good mood is predicated on what will be found in that first quarter GDP report that’s due out next Wednesday.
Market indicators have shown mixed signals recently. Yesterday’s release of the Purchasing Managers’ Index (PMI) data served up a side dish of bad news. The composite index dropped to 51.2 in April, down from 53.5 in March. The composite index value is 51.2, maintaining it solidly in an expansionary zone. That means growth is possibly slowing down, but hasn’t started to actually shrink.
A growing spotlight has turned toward the consequences of these tariff disruptions, particularly on our nation’s economy. Analysts and economists are especially attentive to the ways that businesses and consumers are reacting to these shifts. This easing of tension in the trade war would likely buoy market sentiment in the coming weeks.