The Future Reckoning of Tariff Escalation

Michael Zezas, Global Head of Fixed Income Research and Public Policy Strategy, discusses the recent increase in U.S. tariffs and their potential market impact. He characterizes the current situation as a period of "tactical escalation," with tariffs rising to a level higher than initially anticipated (15-20%) but still below previously feared levels (25-30%). He explains that this escalation puts pressure on U.S. growth, potentially leading to lower government and corporate bond yields, but is unlikely to derail an equity market rally. The analysis considers the implications for various trading partners, including Mexico, Canada, Europe, and China, highlighting potential sticking points in negotiations and the possibility of further volatility. The podcast concludes by emphasizing the need to monitor negotiations with major trading partners, as significant escalation could negatively impact equities and credit.