COPPER TECHS: (N5) Bear Threat

Tsy Sec Bessent says in a Q&A at an event that despite a "little uncertainty" about the economy, "We got some very good jobs numbers last Friday, so I think that we are in pretty good shape." Says so many trade negotiations upcoming that he's "not planning on going anywhere for Easter"

• In his recent appearances, Bessent has been playing up two angles to the upcoming tariff negotiations: 1) a unified approach w China's major Asian trading partners, 2) warning others not to cooperate with China, suggesting the Chinese could trigger a dumping/devaluation/deflationary bust globally:
• "Unfortunately, the biggest offender in the global trading system is China, and they're the only country who's escalated ... the economic minister in Spain made some comments this morning: maybe we should align ourselves more with China. That would be cutting your own throat, because I can tell you that these Chinese exports, that the US tariff wall is going to keep out... For all of you who can remember that Disney movie of the brooms carrying the buckets of water - that is the Chinese business model, it never stops. They just keep producing and producing and dumping and dumping, and it's going somewhere. And I think at the end of the day that we can probably reach the ideal with, with our allies, with the other countries that have been long term good military allies, not perfect economic allies. And then we can approach China as a group."
• On bank regulation, Bessent says "we intend to take a different approach" to the Basel regulations; will "look at the capital buffer framework that applies to the largest banks", hinting at loosening of various rules for US banks.
• "The bank regulators are now hard at work to develop a proposal to ensure that leverage capital functions as appropriate. ...it is time that we step back and reassess .. cost/benefits of the liquidity framework, this assessment should identify opportunities to expand the role of loans and other productive assets as collateral for funding during a period of stress, and thereby help get banks back into the business of lending. For example, we will revisit the role of the discount window and the Federal Home Loan Banks, including whether there are opportunities to clarify the role of these funding sources in internal liquidity stress testing and the supervision of banks contingency funding plans. Our assessment will also consider whether examiners have developed a bias toward reserves over other liquidity sources, and how we can better ensure that liquidity buffers are indeed buffers, not regulatory minimums that banks can draw down during a period of stress."

Minneapolis Fed’s Kashkari (’26 voter) offers hawkish commentary in the face of tariffs. See the below excerpts from his latest essay (in full here): 

• “In my view, the hurdle to change the federal funds rate one way or the other has increased due to the tariffs.”
• Bar for cutting rates higher despite weaker economy, notable increase in risk of unanchored inflation expectations: “Given the paramount importance of keeping long-run inflation expectations anchored and the likely boost to near-term inflation from tariffs, the bar for cutting rates even in the face of a weakening economy and potentially increased unemployment is higher. Given that we don’t yet know how many countries will respond to the tariffs and whether we are beginning a trade war with tit-for-tat tariff increases, the risk of unanchoring inflation expectations seems to have increased notably.”
• Even the downside angle is couched in a hawkish manner, noting a reduced ‘immediate’ need to hike rates: “On the other hand, given that the demand for investment capital will likely be lower and push short-run r* down, policy is getting somewhat tighter on its own, reducing the immediate need to raise the federal funds rate to keep long-run inflation expectations anchored.”
• Flexibility needed amidst uncertainty: “As recent weeks have reminded us, nothing is certain and no monetary policy response, up or down, should be completely off the table. Going forward, I will be paying close attention to further trade policy announcements from U.S. authorities and our major trading partners, to indications of expected inflation, and to the traditional measures of economic activity, actual inflation and employment. Either a rapid resolution of trade policy uncertainty or a sharper than expected downturn could lead me to revise my outlook for appropriate monetary policy.”

The EU has adopted tariffs on E21bln of US goods in response to the levies imposed on EU steel and aluminium exports last month. There tariffs are not a response to the 20% 'reciprocal' tariffs imposed by US President Donald Trump, with the EU still working out the details on its response to those levies. 

• The EU tariffs of up to 25% will come into place in a staggered manner. As Politico notes "the first set of tariffs on goods such as cranberries or orange juice, which the EU initially imposed in 2018 during the first Trump presidency but suspended in 2021, will take effect on April 15."
• Politico: "A 25 percent duty will then kick in from May 16 on a second batch of imported items such as steel, meat, white chocolate and polyethylene. Finally, a 25 percent duty on almonds and soybeans will take effect Dec. 1."
• European Commission statement says "These countermeasures can be suspended at any time, should the US agree to a fair and balanced negotiated outcome."
• Alex Cadier at Poland's TVP World reports that 26 EU member states voted in favour of the measures, with Hungary the sole hold-out voting against.