While all eyes are on the expansionary Big Beautiful Bill, there are increasing indications that the tariff "pause" may end in something closer to a Liberation Day 2.0 than relief. Thread.
From a macro perspective the tariff policy outcome is far more important than the nuances of the big beautiful bill. Even with the China "deal" a couple weeks ago rates are still quite elevated, with the question ahead of whether further relief comes or we revert back.
There are a wide range of economic impacts that could play out here. Everything from a loosening that could largely be absorbed through the supply chain, to highly growth disruptive tariffs, particularly if targeting key sectors.
While China is a key lynchpin driving the broader economic impacts, the reality is that all the negotiated deals with other major trade partners also matter a lot along with the possibility of various sectoral tariffs.
Its no surprise that negotiating trade deals with 150 countries in 90 days has proven difficult and the admin increasingly recognizes this. It looks increasingly like the US will simply set the desired rate sometime soon. https://www.politico.com/news/...
On Sunday @SecScottBessent outlined a framework that suggested those countries not negotiating in good faith may see their tariffs rise back to Liberation Day levels. https://x.com/atrupar/status/1...
While of course any rhetoric during a negotiation always has some form of grandstanding to it, there are increasing signs that other countries / regions feel emboldened to wait and see following the China deal rather than negotiate. https://www.bloomberg.com/news...
Further earlier this week Trump outlined a continued desire to push sectoral tariffs. And suggested net higher tariffs ahead relative to liberation day. Elevated duties on many of these could have substantial knock on impacts across the economy. https://x.com/SpecialSitsNews/...
About halfway thru the 90d "pause" there is still little clarity about how the tariffs are likely to get resolved. While strategic ambiguity and tough rhetoric are likely in part negotiating tactics, recent signaling suggests increasing comfort with elevated duties ahead.
With equities at nearby highs, the admin is getting little feedback about the risks of maintaining higher duties. If anything bonds would benefit from a tougher stance. Taken together, it suggests that downside risks of the tariff rates ahead are underpriced at these levels.