Tariffs create a one-time price change that could be viewed as similar to a tax hike.
I changed my mind Nick Timiraos had a good article in the WSJ overnight and it has changed my mind on the bond market impact of tariffs. There are two ways you can look at the bond market impact of tariffs. One: Look at recent history. Almost every tariff announcement in 2018 and 2019 saw bonds rally. This is a pretty good starting point for what bonds might do now.
But several years of high inflation triggered by the pandemic and a policy response that showered the economy with ultralow interest rates and fiscal stimulus have raised questions over whether the Fed could be as relaxed about an increase in prices. If the cement is wet, expectations of higher inflation in the future could sustain higher price growth.
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