Trade uncertainty clouds business plans, shakes markets, and raises recession fears
Solid economic data, such as March’s strong jobs report, quickly gave way to the tariff-driven turbulence of early April. While the stock market swiftly reacted to the tariffs, it was the sharp rise in bond yields—and the corresponding impact on interest rates and exchange rates—that forced the pause on some of the highest tariffs. China was the exception as tariffs ratcheted even higher.
In the meantime, companies large and small are grappling with the uncertainty tariffs bring to their supply chains for key inputs. Within the auto industry, several companies have paused some production in all three North American countries, while others are holding imported vehicles at U.S. ports and halted rail shipments from Mexico. These actions have resulted in worker furloughs, including in the U.S. Similarly, repercussions are rippling through many other industries. Until there is more clarity around trade and tariffs, expect more stories of stalled investment decisions and delayed growth plans.
Meanwhile, there has been fallout. For instance, other countries – most notably, China – have clapped back with retaliatory measures, including increased tariffs on U.S.-made goods. Moreover, foreign consumers appear to be canceling U.S. travel plans and boycotting some U.S. goods.
Thus far, The U.S. economy has been resilient, but it’s in a holding pattern awaiting resolution on the tariffs. The longer this uncertainty lingers the more intense the headwind for the economy becomes in the near term—fueling continued volatility in financial markets, which we expect will persist in the near term.
