The Fed has cut rates and is expected to cut them again soon, but bond yields are still spiking upwards:
No wonder rates are rising:
Personally I would want more than the current yield to hold 10 year US Treasuries.
Meanwhile, my gold is doing nicely, up again today 
The treasury yield curve has uninverted from 2 yr and longer but still inverted on the short end.
As inverted yield curve is a recession indicator un-inversion has to be good news.
Feds pushing down short rates is one aspect but large govt borrowing to fund deficits may limit those cuts.
This man reads the market quite well. He’s made up his mind where things are going:
Treasury yields are moving up in anticipation of raising tarrifs and stronger economy will force the fed to pause on cutting the rates
Would not rising tariffs be a drag on the economy?
Steve
Almost certainly. Too many factors to cover here–particularly the political claims the tariffs would pay for themselves. You know, like they did the last time they were imposed.
Rising interest rates are typically the sign up of heating up economy. So this is bullish, right?
No. Raising tarriffs will be a major drag on the economy. There was a conservative report ( so relatively credible for everyone ) talks about across the board 20% tarrifs is equivalent to a major tax hike. Now that is a view shared by most folks, because the tarriffs are not going to impact the country that is exporting but the importing agency and that is going to drive the prices for the US consumers. May be in the long run you can get to manufacture few things here but still that also drives the cost up.
The FED is in a tricky place where the real rates are high, and the economy is doing good. Cutting interest rates now will drive inflation. If I were FED, I will stand still until the election to know the direction of the administration and also give some time for the initial cut to show up in numbers.
I saw a recent news analysis that in a diverse economy rising tariffs allow domestic competitors to gain marker share.
Or will they raise prices to match imports? Or will foreign suppliers cut prices to retain market share? Or will they cut prices below costs and be accused of dumping?
Isn’t economics fun?
A 20% tarriff increase the end consumer price. China will not cut price because they are not paying it. It is not 20% margin between US and China. If you slap 20% on BMW, Mercedes that may have an impact but 20% is not going to cut it with China or many other developing countries. Now, other countries will reciprocate tarrif that will severly affect US exports, because a 20% price increase will push US products uncompetitive.
The tarriff should be the price difference between your domestic industry and imports and domestic industry has to have capacity. If both of these conditions are not met, then it is one of those election stunt which has no real practical possibility.
Exporting country can reduce their price to soften the blow and retain market share. 20% reduction on average may not be possible but i doubt that is true 100% of the time.
Yes, there must be domestic competitor. And you are not surprised to learn parts in a made in USA washing machine are made in China.
If there are any domestic competitors. No consumer electronics are built in the US anymore, for one example. Even a USian built car, is full of Chinese parts.
A few years ago, my laundry washer went on the fritz. This was during the time that a protectionist tariff had been imposed on Korean washers, to protect Whirlpool. I found that a basic Whirlpool washer cost over $800 at Lowes, vs $500 for the washer I bought in 2010. That tariff expired in January 2023. A comparable Whirlpool washer is now “on sale” at Lowes for $578. “marked down” from $849, which was probably the price before the tariff expired.
Steve
This. In the long term. In the short term, all it does it raise prices.
As I’ve said in other threads, the anti dumping and tariff numbers for China are in the neighborhood of 100-340% for some products.