🔮Tariff Deals, Recession Anyway
What happens next on trade
Markets whipsawed yesterday on headlines about Trump’s tariff rollout. But when you zoom out, the situation looks clearer.
Here’s where traders on Polymarket think the tariff situation is headed:
1. Trump tariffs probably won’t be cancelled before taking effect.
The market pumped wildly yesterday on a headline, later confirmed as false, that Trump was considering a 90-day hold on the tariff rollout.
But there’s only a 25% chance that any of the new tariffs are paused today.
2. The tariffs are likely to be BIG.
The US is 🔮 81% likely to exceed a 5% weighted average tariff level in the first half of the year - almost a doubling from the current rate of 2.6%.
3. Then we’ll get some deals over the next two months.
Odds for Israel to get the first trade deal plummeted to 🔮 22% after Trump cancelled a planned press conference with Netanyahu.
But the market still thinks its highly likely we’ll see at least 10 trade deals by June. Most likely are Japan (🔮 87%), Taiwan (🔮 82%), and Vietnam (🔮 82%).
4. But not with China.
Trump is much more likely to increase tariffs on China than cut them after Beijing slapped retaliatory tariffs on the US.
5. Despite deals, US likely to enter recession.
Polymarket traders are now pricing in 🔮 62% odds for a US recession this year. It was just 20% before the tariff rollout.
6. The Fed will respond by cutting rates later in the year.
Odds for higher numbers of rate cuts in 2025 have increased in the last week.
But we’re still only 🔮 22% likely to see a rate cut at the May meeting.
7. Inflation will go up.
The market sees inflation picking up this year. Odds for it to top 3, 4, or even 5% annualized have all increased since “liberation day.”
8. US borrowing costs could drop a bit. Maybe.
A popular theory online is that Trump is trying to tank the stock market to reduce US borrowing costs (people usually buy bonds when they dump stocks, pushing down bond yields).
How low could they go? There’s a 🔮 51% chance the 10-year hits 3.5% this year, just a half-point drop from current levels.
9. Trump’s economic team is most likely to quit or get fired.
Forget Signalgate. Treasury Secretary Scott Bessent and Secretary of Commerce Howard Lutnick are now firmly in the lead as the most likely to exit the Trump team this year.
Bessent is reported to be looking to resign, and Lutnick is absorbing blame for the tariff policy.
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