Trump Tariffs Take Effect; Vicious Treasury Sell-Off
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Good morning, I'm Nathan Hager. And I'm Karen Moscow. Here are the stories we're following today. Karen, we begin with the new salvo in President Donald Trump's global trade war. So-called reciprocal tariffs are now in effect for roughly 60 countries, bringing duties around the world to levels that haven't been seen in a century. They've ripped us off left and right, but now it's our turn to do the ripping. That's okay, we're going to...

Make our country even stronger, stronger than it ever was. Speaking at a Republican fundraising event, President Trump said tariffs are already bringing in $2 billion a day, and he said they're leading to negotiations. The president says he had a great call yesterday with South Korea's acting president. He also spoke this week to Japan's prime minister, who urged the president to reconsider.

Well, Nathan, Asian nations are bearing the brunt of the new tariffs. Cambodia is now under a 49% tariff rate. Vietnam's is 46%. But China is taking the hardest hit with duties on top of existing tariffs running as high as 104%. President Trump says that'll force Beijing to the table. They don't want tariffs on themselves. And it's very simple. We're making deals and

People are paying tariffs. Countries are paying tariffs. Right now, China's paying tariffs.

A 104% tariff. Think of it, 104%. And President Trump said he won't stop there. He says he'll announce tariffs on pharmaceuticals very soon. He's also threatened other sectoral tariffs on lumber and semiconductors. Well, so far, Karen, China has not immediately responded to the new tariffs. That's a departure from the last two episodes when Beijing hit back within minutes. For more, let's go to Hong Kong, check in with Bloomberg's Jill Dees. So, Jill, what is the latest?

Good morning, Nathan and Karen. Yes, so far we have not really seen any kind of drastic measures out of China. It's really been radio silence. All we've really seen from Beijing is they've released a short white paper on trade with the United States. But this does stand in pretty stark contrast to just earlier this year when there were earlier levies that Donald Trump implemented on China. We saw immediate responses in the form of additional retaliations that came later.

with some tariffs on American goods that were sent to China that also came with some other punitive measures, such as investigations into various American companies that do some operations in China. That doesn't mean, though, that China isn't going to respond. Remember, we did see over the weekend when that initial 10% tariff went into effect.

that China came out with its own duties on the United States. That's, of course, what led to this massive escalation leading to that total number of 104 percent that Trump has implemented in tariffs on China. So it could be that China is kind of biding its time. Maybe it'll come back with something else. We've also heard there's been some reporting that some within Chinese officials are meeting to talk about some economic measures that they could

take to sort of bolster the economy right now. Obviously, all of that coming against the backdrop of tariffs. We'll have to see what continues to come just over the coming hours, if not days and weeks. In Hong Kong, Jill Deese says Bloomberg Radio. All right, Jill, thank you. Now let's head to Europe, where stocks are selling off on the Trump tariffs. And Bloomberg's Ewan Potts joins us in London with the latest. Good morning, Ewan.

Karen and Nathan, after yesterday's bumpy session in Europe, which saw stocks gain before a late sell-off, the direction of travel so far this morning is very clear, and it is down only 16 of 600 shares on the benchmark stocks, 600 in the green today, with the index currently down 2.7%.

All 20 industry groups lower, with healthcare stocks the worst performers, off more than 4.5%. Energy and real estate also underperforming this morning. Looking across the region, the Swiss market at the bottom of the table is currently down more than 4%.

Live in London, I'm Ewan Potts, Bloomberg Radio. Ewan, thank you. Here in the U.S., futures are mixed. Dow futures lower, Nasdaq futures higher. That puts S&P futures right in the middle. But that follows yet another turbulent session on Wall Street. For four straight sessions, we've seen moves of at least 4% from peak to trough. The S&P 500 is down almost 19% from its February record, posting the worst four-day run since March 2020.

Well, Nathan, we are seeing major movements in the bond market once again this morning. And we bring in Bloomberg's John Tucker for the very latest. John. And Karen, treasuries, which are supposed to be the safest and most liquid assets, they're selling off. And when the prices go down, the yields go up. Calvin Yeo, money manager at hedge fund Blue Edge Advisors, says this is a fire sale of treasuries. He adds it's like ice sculpting in a forest fire.

Grace Peters, a JPMorgan Chase, sees it this way. You know, what the market is digesting this week is that tariffs are not going away and volatility is likely here to stay. U.S. government bonds may be losing their safe haven status over concerns the trade war will trigger stagflation. Hedge funds may be unwinding a popular leverage trade. And investors may just be dumping whatever they can to get cash.

That could signal liquidity concerns, and that's never a good sign for markets. Some investors also speculate that global reserve managers like China could be re-evaluating their positions in U.S. government debt. In the U.S. right now, the 10-year is down 10.30 seconds in price. That is pushing the yield up four basis points today.

the 433. In New York, I'm John Tucker, Bloomberg Radio. All right, John, thank you. We're hearing a warning this morning from former Treasury Secretary Larry Summers. He says the U.S. is now likely headed toward a recession thanks to the tariff increases. We'll see an extra two million people be unemployed. We'll see losses in household income that are

$5,000 a family or more. We're very likely in the context of a recession to see markets reach levels significantly below their current levels. Former Treasury Secretary Larry Summers also tells Bloomberg's Wall Street week an economic downturn would have various other negative effects, including a wider budget deficit. You can get the full conversation with Bloomberg's David Weston

on the Bloomberg Talks podcast or watch it on the Bloomberg Podcasts page on YouTube. Meanwhile, Nathan, many strategists say Trump's tariff policy should not come as a surprise. Libby Cantrell is managing director for public policy at PIMCO. This is a worldview that President Trump has had for 40 years. This is what we keep telling our clients.

And he ran on this. He believes he has a mandate to fulfill this. He believes that there's a lot of unfinished business from the first administration. And I think that the market obviously wants to maybe see through this or hope that there is something that will result in a different outcome. But our view is tariff rates are going to be going up and that will have a headwind on growth and likely have implications for inflation.

PIMCO's Libby Cantrell says one of the president's primary goals is balancing the goods trade deficit and that he plans to use tariffs until that metric is better balanced. Karen, this morning we have a warning as well from Ray Dalio for investors who may be too fixated.

on tariffs. Let's get the details on that from Bloomberg's Lisa Mateo. In a post on X, the billionaire founder of Bridgewater Associates said investors are not paying attention to underlying conditions, the breakdown in major monetary, political, and geopolitical orders, and that failing to do so may blindside them to the biggest disruptions that are still to come.

Dalio explained how Trump's tariff policies are driven by too much existing debt and the rate at which new borrowing is added. He said the U.S. is hooked on using debt to finance excessive spending, while creditor countries like China sell goods to debtor nations like the U.S., and that will lead to a correction of these imbalances and a change in the monetary order.

Thalia also notes that gaps in education, opportunity and values are contributing to a breakdown of the democratic system and the rise of autocratic leaders, while the U.S. is shifting from a multilateral to a unilateral approach in the geopolitical arena. Lisa Mateo, Bloomberg Radio.

All right, Lisa, thank you. Well, Bloomberg News has learned the White House's top economic team argued over plans to impose even bigger tariffs. Trade advisor Peter Navarro was among the more hawkish officials who pushed for a flat 25 percent levy on all countries. The revelation comes as Elon Musk called Navarro dumber than a sack of bricks. That's a

quote, and truly a moron on social media. Navarro said the Tesla CEO was a, quote, car assembler who used parts from other countries. White House spokesperson Caroline Levitt downplayed the spat. Look, these are obviously two individuals who have very different views on trade and on tariffs. Boys will be boys, and we will let their public sparring continue. And you guys should all be very grateful

that we have the most transparent administration in history. And I think it also speaks to the president's willingness to hear from all sides, that he has people at the highest levels of this government in this White House who have very diverse opinions on very diverse issues. White House spokesperson Caroline Leavitt and Musk defended Tesla as the most vertically integrated auto manufacturer in America.

It's time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's Michael Barr. Michael, good morning. Good morning, Karen. It's another disturbing milestone in the Texas measles outbreak. Texas has now confirmed more than 500 measles cases in a little more than two months. The outbreak is responsible for two deaths and more than 50 hospitalizations. Meanwhile, Health and Human Services Secretary Robert F. Kennedy Jr. now says he is encouraging people to get vaccinated against measles.

I'm not going to take people's vaccines away from them. What I'm going to do is make sure that we have good science.

so that people can make an informed choice. Kennedy spoke on CBS Mornings. A roof collapse at the iconic Jet Set nightclub in the Dominican Republic has killed at least 98 people and others may be trapped. Emergency Center Director Juan Manuel Mendez says crews would search tirelessly for people at the site of the collapse in Santo Domingo. Among the missing is Meringue singer Ruby Perez, who was among those performing when the roof collapsed.

Those who died include a saxophonist on stage, local politicians, and two former Major League Baseball players, Octavio Dottel and Tony Blanco. The acting chief of the IRS plans to quit after a deal to share tax data of undocumented immigrants with Homeland Security authorities. Acting Commissioner Melanie Krause is also said to have disagreed with the agency's direction.

A federal judge in New York will hear arguments on the Trump administration's use of the Alien Enemies Act to deport undocumented migrants. Lee Gerlund is the American Civil Liberties Union attorney leading the challenge against that use of the act. He says he believes President Trump has exceeded his authority.

We are hoping that the judge will issue a temporary restraining order to keep things in place while the case can proceed further and that we can provide the court with more briefing and more facts. On Monday, the Supreme Court lifted a D.C. judge's order that prevented the White House from deporting Venezuelan migrants who the government alleges are gang members. Global News 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg, Karen. All right, Michael Barr, thank you.

When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

If you're going there, so are we. Book now on emirates.com. Fly Emirates. Fly better.

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Time now for the Bloomberg Sports Update. Here's John Stashower. John, good morning. Good morning, Karen. The Knicks and the Celtics with a hint of what could very well happen when the NBA playoffs get to the second round. Tight game at the Garden. Knicks had a one-point lead and the ball. Brunson will try to orchestrate. With the one-point lead, Brunson will drive. Cutting hard.

What a pass by Brunson. What a finish by Hart. Here come the Celtics. It's Tatum on top. Tatum jab stepping. A three for the Todd. Got it. TNT. Josh Hart missed a game-winning shot at the end of regulation. And Boston won in overtime. 119-117. The one-time Nick Kristaps Porzingis at 7'3". Put on a long-distance shooting display. Eight three-pointers. A couple of them from the logo. He scored 34 points.

Jason Tatum scored 32. Carl Anthony Towns led the Knicks with 34. Nets beat New Orleans 119-114. The Denver Nuggets, only three games to go in the regular season, fired Michael Malone, their coach, the past decade. He coached them to the NBA championship only two years ago. Devils lost to the Bruins 7-2. The Islanders a wild 7-6 overtime loss in Nashville. And talk about wild. The Vancouver Canucks...

Trailed in Dallas 5-2 with one minute left. Scored three times in the final minute and won in OT. Making six wins in a row for the Mets. They're 5-0 on this first homestand. They beat the Marlins 10-5. Francisco Lindor, a leadoff home run, four RBIs for Pete Alonzo. Those Yankee Torpedo Bats, very quiet in Detroit against Tigers ace

Tarek Skubal, Yanks had just six singles, got shut out 5-0 in their third straight loss. All three without a home run being hit. The Nationals again surprised the Dodgers. 8-2, James Wood, two homers, five RBIs. Red Sox lost to Toronto 6-1. John Staschauer, Bloomberg Sports, Karen and Nathan.

Coast to coast on Bloomberg Radio. Nationwide on Sirius XM. And around the world on Bloomberg.com and the Bloomberg Business App. This is Bloomberg Daybreak. Good morning, I'm Nathan Hager. And as promised, President Donald Trump's so-called reciprocal tariffs are now in effect, driving duty rates for countries around the world to 100-year highs. And even after four straight sessions of market turmoil on Wall Street, the president says tariffs are already a win.

We're making a fortune with tariffs. Two billion dollars a day. Do you believe it? I was told two billion dollars a day. And that was the president speaking at a Republican fundraiser in Washington last night, hours before these new tariffs kicked in. This morning, we're joined by Bloomberg News global trade editor.

Brendan Murray. Brendan, can we start there? Where did that $2 billion a day number come from? How much money is the U.S. taking in from the duties that have already been in effect? Good morning. Well, that's the number he's saying is coming into the U.S. Treasury collected by the Customs Agency. He started with 10% on China. Then he went to 20%. And now we're looking at 104%.

starting today. So that's the amount of money he thinks it's generating. He's going to need a lot of money to pay for the tax cuts that he's trying to push through Congress to extend as well. So there's both the effort to rewrite U.S. trading relationships, trade deals with

countries like China, economies like the European Union, and as well as to generate revenue for the Treasury to help reduce the national debt. We should talk, Brennan, about the scope of these tariffs. You mentioned the 104 percent duty on China. That alone is eyebrow raising. But we're at levels that literally haven't been seen since even before the Smoot-Hawley tariffs in the 1930s.

Yeah, exactly. So, the average U.S. tariff rate has gone from something in the mid-single digits, 5%, 7%, to over 20% now with the tariffs that were enacted today. The European Union was hit with 20%, the U.K., 10%. Countries in Southeast Asia, like Cambodia and Vietnam, are looking at rates in the mid-40% to

So, those were countries that companies had shifted to, to move their supply chains outside of China. So, pretty much, there's no place to hide from these enormous tariff rates that the President imposed today.

And as the president mentioned last night, he's already been having discussions with the leaders of South Korea, Japan. We saw Israeli Prime Minister Netanyahu in Washington this week. So far, though, China hasn't immediately retaliated. Does that come as a surprise?

It's a little bit of a surprise, though China likes to wait until right before the U.S. stock market opens. It has done that in the past to maximize the impact, the economic impact, the financial impact on the U.S. So, China has been quiet for the past several hours. The government hasn't said anything publicly, but that can't last. And they have said that they will fight to the end on this, in this trade war.

and not cave to pressure. So, it's only a matter of time. There's only so much imports that China can hit, imports of American products. So, they're going to be looking at other things like export controls, cutting off American access to raw materials, things needed to make high-tech gear. And they've also got big U.S. tech

companies there and big U.S. automakers, including Elon Musk's Tesla. So if you're an American company in China right now, you know, you're potentially a target for the government's retaliation. Really appreciate this, Brendan. Again, thanks again for being with us this morning. That is Brendan Murray, Global Trade Editor for Bloomberg News.

Nathan, we're just watching the markets this morning as treasuries extend their decline. Stocks in Europe are lower and futures this morning are mixed. S&P futures, they're up 0.2% of 11 points. Dow futures are little changed. NASDAQ futures up 0.6% or 106 points. The DAX in Germany is down 2.2%. So is the CAC in Paris. FTSE 100 down 2.1%. The Nikkei 225 in Japan.

it was down about 4%. The 10-year Treasury down 12.30 seconds. The yield 4.34%. Yield on the two-year, 3.78%. The 30-year yield, 4.79%. NYMEX crude oil is down 3%, down $1.77 at $57.85 a barrel. COMEX Gold up 2.5%. It's up

$73.10 at 3063 an ounce. The Bloomberg Dollar Spot Index, it's lower. It's down 0.5% with the euro, 1.1030 against the dollar. The yen, 145.38. And Bitcoin up 0.25%. Nathan. Okay, Karen, thank you. And for more on the market impact, we are joined now by Seema Shah, Chief Global Strategist.

at Principal Asset Management. Seema, it's great to have you with us this morning. Where do you see risk assets in particular going now that these new tariffs are in effect around the world? Good morning. Well, look, with the new tariffs, particularly the escalation of China's tariffs,

We are looking in a slightly – I mean, I think it's a very concerning global economic picture, and also for the U.S. From our perspective, unless there is a –

I guess, a release of those tariffs or you have some kind of positive news with regards to tax cuts or deregulation, it is quite likely that the US would slide into recession. There is still, I think, a lot to be seen over the next couple of months from the administration, but certainly that is the direction that things would move without any kind of action to reverse some of the things that have been playing out over the last couple of weeks. So from that perspective,

I think it seems likely that you're going to have risk of sentiment lingering for a little while longer, at least. We need to see a re-rating of valuations to a point where investors are once again interested. And to have that, you almost need to see another downward revision of earnings forecasts to a slightly more realistic level, one which is more reflective of a weakened economic picture. Is that what we're seeing in the Treasury market right now with the sell-off across the curve this morning, a repricing for recession?

I think the sell-off in the Treasury curve is actually quite confusing. It's quite opaque. There's a number of different possibilities that could be playing out over here. It could be down to inflation concerns. It could be concerns around tax revenue with a weaker economic outlook.

then starting to create additional fears around the budget deficit. And of course, there's the key risk out there, which investors are increasingly talking about, which is a loss in interest of the US as a safe haven. As I said, it's very unclear exactly which one of those is really the key driver, but certainly it does make the economic outlook that much more concerning if you have interest rates which are spiking at a time when they should ideally be falling.

If the U.S. is losing its status as a safe haven, where is a safe haven at this point?

Well, it's been interesting today when you look across the global market and you can see that there are some traditional safe havens still playing out. So the Japanese yen, German bund. So there are still places in the world. And that gives us an indication where if investors were really to start losing interest, and I have to say, I think it is still quite premature. And there's a lot to be discussed and read into to understand exactly what is going on.

But the alternative to a US dollar, it's not entirely obvious at the moment. There is potential, maybe over the next couple of years, for the euro to show growing prominence. If Europe can show close integration, you see additional fiscal spend, infrastructure spend. But that is still a big question mark. So I think the jury is still out. But of course, the developments in the last, I think, 24 hours are an additional concern on top of what was already

already worrying markets at this point. I would imagine there are some questions as well as to what tariffs could mean for the European economy at a time when they've been looking to increase defense spending. What's the outlook for Europe now?

Yeah, I think after the Wednesday Liberation Day announcement, we did lower our forecast for Europe even further. For Germany, we now see recession is quite likely. So that was a shift down from 0.3% growth in 2025. And for Europe,

We've lowered our forecast from 0.8% this year down to 0.3%. So still skirting recession. But of course, these are really based on what are the sensitivities to tariffs? Are there going to be any substitution? And of course, the question around retaliation is still there.

So there is the risk that this is even deeper concern than we're already seeing. Now, the good news is, is that the fiscal stimulus from Germany, it will start to positively impact the economy, but not until 2026. And at that point, we would start to see a stronger picture. So right now, 2025 is looking particularly tough.

But brighter times ahead from 26 when the fiscal stimulus starts to bleed through to the real economy. To bring things back to the U.S., there had been a question before these new tariffs kicked in about whether the Fed could step in at some point if we're heading into a stagflationary environment. Where is the Fed now? What kind of response could they pose here with these new tariffs?

So from a traditional standpoint, when you're just thinking about interest rate cuts, we are expecting the Federal Reserve to be able to put more emphasis on the employment side of their mandate. So even if you were and we are expecting inflation to increase, our forecast is for core PCE to hit around 4 percent by year end. But even with that and

Assuming that inflation expectations remain fairly anchored, we do think the Federal Reserve will start to cut rates within the next meeting in June and cut maybe by three to four times. The only scenario that we see hikes at this point is if actually the economy were to return to significant strength. So we do think even in stagflation, the Fed emphasises the employment side of their mandate. The bigger question I think at the moment, which is really being discussed in circles,

is if you were to see a continued sell-off of U.S. Treasuries, is there a role for the Federal Reserve to come in with some kind of emergency action? We're still far from that, but I think it is something that we need to keep watching, that if there is a concern around the financial plumbing of the system, is there something that we can expect from the Fed on that count? Got about 30 seconds left, Seema. Are we in a game of chicken between the market and the president? If so, who blinks first?

I think that's exactly what we're in. Trump has focused a lot on bond deals. That's what he's been saying. So if he's watching this picture, he will be likely quite concerned about what is unfolding in front of him. And if this continues, then potentially we could see a step back from the administration with regards to the policies that they've already introduced.

This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify, or anywhere else you listen. You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston, and nationwide on Sirius XM Channel 121.

Plus, listen coast to coast on the Bloomberg Business app now with Apple CarPlay and Android Auto interfaces. And don't forget to subscribe to Bloomberg News Now. It's the latest news whenever you want it, in five minutes or less. Search Bloomberg News Now on your favorite podcast platform to stay informed all day long. I'm Karen Moscow. And I'm Nathan Hager. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak.

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