Hulk Hogan, wrestling icon, dies at 71 in Florida home
Investing.com - U.S. President Donald Trump's decision to pause his steep "reciprocal" tariffs reduces immediate risks to economic activity, but still prolongs lingering uncertainty, according to analysts at Morgan Stanley (NYSE:MS).
In a note to clients on Thursday, the analysts led by Michael T Gapen added that, against this backdrop, they continue to expect that the Federal Reserve will not cut interest rates this year.
However, a broader downturn in the world's largest economy could cause the central bank to bring forward reductions, the brokerage added. U.S. growth is projected to be sluggish in 2025, with Q4/Q4 gross domestic product coming in this year at just 0.6%, they predicted.
Minutes from the Fed's meeting last month showed that policymakers remain worried that twin tariff-fueled risks of higher inflation and slower growth are facing the U.S. economy.
On Wednesday, with markets around the world roiling, Trump abruptly revealed a reversal of most of his punishing and sweeping tariffs on a host of countries, saying he would pause them for 90 days. However, Trump said in a social media post that these nations would still face a "substantially lowered Reciprocal Tariff" of 10%.
Crucially, the halt did not apply to China, long the main focus of Trump's trade-related ire. Instead, he said he would lift the tariffs on Chinese imports to a staggering 125% -- a move that came after Beijing raised its own duties on incoming U.S. products to 84%, intensifying a trade war between the world's two largest economies. China was the second-biggest source of U.S. imports last year.
Explaining his stunning about-face to reporters, Trump, who had previously insisted that his elevated tariffs would remain in place and told Americans to "BE COOL!" despite recent financial market ructions, said that people were "getting yippy."
U.S. stock futures retreated somewhat on Thursday after the announcement of Trump's sudden reprieve sparked a sharp surge in equities in the prior session. Bond yields also ticked lower following a steep sell-off in U.S. government debt that Trump appeared to cite as one motive for his decision to delay the tariffs.
"The tariff delay underscores our view that the administration is seeking bilateral deals to negotiate these rates lower for countries other than China," the Morgan Stanley analysts said. But they noted that, with the increase in duties on China, the effect tariffs rate is now at "historical highs" of 23%.
"Delays help, but do not reduce uncertainty," the analysts said.