MNI US Macro Weekly: Liberation Brings Liquidation, No Fed Put

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• On April 2  – dubbed “Liberation Day” by President Trump – the White House announced tariffs that went deeper and broader than expected, with an immediate 10% universal tariff on all countries and teeing up an additional ‘reciprocal’ tariff to be imposed according to their own ‘non-tariff trade barriers’ on April 9.
• The shock reverberated through the rest of the week as the inflationary, growth, and earnings implications were digested, with the biggest liquidation of risk assets since Covid ($5T in US equity market cap).
• Implied Fed rate cuts shifted from close to 70bp of cuts priced for 2025 ahead of the announcement on Wednesday, to at one point ~120bp on Friday (ie 4 to 5 cuts) before settling at around 96bps.
• But those expecting an outright policy “put” for equities were disappointed: White House officials signalled they would not back down on tariffs, while Fed Chair Powell reiterated that the Fed was not in any hurry to cut rates as it weighed the implications of government policy shifts for the economic outlook.
• Against this backdrop, data took something of a back seat, particularly since the pre-Liberation Day readings will be interpreted in a very different light to post-tariff data.
• That said, we got more solid “hard” data in the form of March nonfarm payroll gains (though notably weak wages) and steady initial jobless claims, contrasting with a sharp rise in Challenger job cut announcements and soft JOLTS job openings.
• Other solid hard data included factory orders, retail / auto sales, and construction activity – though weak ISM Services and Manufacturing surveys pointed to broad private sector retrenchment.
• Whether the Atlanta Fed’s Nowcast for a GDP contraction in Q1 (the “gold-adjusted” estimate is currently -0.8%) is borne out, the market moves and “soft” data point to significant recessionary potential.
• While most attention for the foreseeable future will be on any developments on the tariff front, next week we get March inflation data, with CPI and PPI backloading the week’s releases on Thursday/Friday.