GLOBAL MACRO: Protectionism Nothing New, Subsidies Usually Preferred Policy
Feb-12 04:50
Increasing tariffs on trading partners was a key election policy of Republican Trump and he has followed through since his inauguration on January 20. However, trade interventions have been part of the global landscape for some time with protective and harmful measures far exceeding liberalising ones for the last 15 years.
- According to data from Global Trade Alert, harmful trade interventions peaked in 2022 and have been trending lower since then. Most governments choose to use subsidies ex exports accounting for 54.3% of the total between 2009-2025 and only 8.6% were tariffs. This trend is unchanged in more recent years, except this year where tariffs to date have accounted for 23.4%.
Global new trade interventions/year
Source: MNI - Market News/Global Trade Alert
- 2024 looks like it may have the least number of harmful measures since data began in 2009, but this early in 2025, data may still be coming in to Global Trade Alert. But for the 1536 harmful interventions recorded, there were only 704 liberalising ones.
- In 2025 to date, there have been 280 interventions with 192 harmful and 88 liberalising. Unsurprising the US has introduced the most number of harmful measures but India and Brazil are not far behind. There has been a partial offset from India with some liberalising interventions.
- This year China then the US and Russia have been most exposed to harmful trade measures, while Ukraine is the biggest beneficiary of liberalising ones.
- Over 2009-2025, Germany, France and Italy have been most exposed to harmful interventions and China, US and Germany to liberalising ones. US, China and Brazil have contributed the most to harmful ones, while Australia, Brazil and India to the liberalising measures, according to Global Trade Alert.
- In terms of sectors, iron/steel products have been hit the hardest over 2009-2025 followed by autos and other fabricated metal products. The US will impose 25% tariffs on steel and aluminium imports from March and autos are currently being considered.
Global harmful trade policy instruments used % total 2024-2025
Source: MNI - Market News/Global Trade Alert
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FOREX: Fresh Lows For GBP, EUR, & AUD, Yen Outperforms
Jan-13 04:44
The USD remains on the front foot, particularly against GBP and EUR, which typically don't move much during the Asia Pac time zone. The USD BBDXY index was last above 1321.7, above intra-session highs from Friday's US session.
- As the session has unfolded GBP losses have accelerated. GBP/USD was last near 1.2130/35, off a little over 0.60% and the worst G10 performer so far today. This is fresh lows in the pair back to 2023.
- There don't appear any fresh catalysts for the move, other than continuation of losses from last week, amid financial stability/twin deficit concerns.
- EUR/USD is back to 1.0210, testing under Friday lows as well. This puts the pair back to levels last seen in 2022. We are around 0.30% weaker against the USD. SEK is off around 035% as well, last near 11.26 against the USD.
- AUD and NZD initially showed some resilience but this hasn't been sustained. AUD/USD was last sub 0.6135, fresh lows back to 2020. NZD/USD is close to 0.5550. We had Australian and NZ data prints, but they didn't shift the sentiment needle.
- Equity sentiment has been weak throughout the region, following losses in US markets on Friday (weighed by higher US yields post NFP). There has been no US Tsy cash trading so far today, with Japan markets out.
- Yen is benefiting from the risk averse tone, with USD/JPY upticks towards 158.00 sold. We were last near 157.50, around 0.15% stronger in yen terms.
- There were a raft of headlines earlier around PBoC support for the yuan, but this didn't support CNH greatly.
- Looking ahead, it is relatively quiet with just NY Fed 1-Yr Inflation Expectations & Federal Budget Balance on tap.
AUSSIE BONDS: Short End Leads Market Lower, US CPI On Wed & AU Jobs On Thu
Jan-13 04:39
ACGBs (YM -15.0 & XM -10.0) are sharply weaker and hovering near Sydney session cheaps.
- Outside of the previously outlined MI Inflation Index and ANZ-Indeed job advertisements, there hasn't been much by way of domestic drivers to flag.
- There have been no cash dealings in US tsys in today’s Asia-Pac session with Japan out for a holiday. TYH5 is, however, weaker at 107-07+, -0-05 from NY closing levels. This week, CPI and PPI inflation measures are on Wednesday and Thursday respectively. The scheduled Fed speaker docket is muted with the Fed Blackout on Friday.
- Cash ACGBs are 10-14bps cheaper, led by the short end.
- Swap rates are 9-12bps higher, with the 3s10s curve flatter.
- The bills strip has sharply bear-steepened, with pricing -5 to -15.
- RBA-dated OIS pricing is 3-16bps firmer across meetings today. A 25bp rate cut is now less than fully priced for April (97%), with the probability of a February cut at 65% (based on an effective cash rate of 4.34%).
- Tomorrow, the local calendar will see Westpac Consumer Confidence data.
- AOFM Bond issuance will resume this week, with A$800mn of the 3.50% 21 December 2034 bond to be sold on Wednesday and A$700mn of the 2.75% 21 November 2027 bond to be sold on Friday.
US TSYS: Tsys Futures Edge Lower, Cash Trading Remains Closed
Jan-13 04:32
- Not surprisingly it has been a quiet session for Tsys with cash trading closed with Japan out. Short-end tsys futures have broken below Friday's lows, however ranges have remained tight. TU has traded sideways since this morning, last -00⅞ at 102-15+, while TY is -04+ at 107-08.
- There was a decent flattening across curves on Friday, with the 2s10s dropping 4.5bps to 38bps, while the 5s30s & 2s30s both fell about 10bps. The 10yr closed at 4.759%, breaking above the 2024 highs, with sights now on the 2023 highs of 5.01%.
- Former Fed Vice Chair Randal Quarles dismissed concerns over the Fed's independence under Trump, emphasizing its structural resilience to political pressure. He noted that tariffs are unlikely to drive inflation significantly and predicted limited labor market impacts from potential deportations. With US inflation progress stalling and a resilient labor market, the markets are now expect just one Fed rate cut in 2025 and not until October/December meetings.
- Projected rate cuts through mid-2025 have cooled slightly throughout the session vs. Friday morning levels*: Jan'25 at -0.7bp (-1.7bp), Mar'25 -5.1bp (-10.1bp), May'25 -9.2bp (-15.9bp), Jun'25 -16.9bp (-25.6bp), Jul'25 -18.7bp (25.5bp).
- The calendar is light on today, with just NY Fed 1-Yr Inflation Expectations & Federal Budget Balance, focus will turn to PPI & CPI later in the week.
