President Trump hints he’s ready to negotiate on tariffs as stocks around the world continue to tumble on Monday. On Sunday evening he said he’s “open to talking” with world leaders on new trade deals. “I’m willing to deal with China, but they have to solve their surplus,” he said aboard Air Force One. But he also advised that the tariffs will continue until the US trade deficit is eliminated: “Unless we solve that problem, I’m not going to make a deal.”
US nonfarm payrolls rebounded in March, rising more than expected. Hiring increased to 228,000 jobs for the month, up from the revised 117,000 in February. “Today’s better than expected jobs report will help ease fears of an immediate softening in the US labor market,” said Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management. “However, this number has become a side dish with the market just focusing on the entrée: tariffs.”
A growing list of economists see rising odds for a US recession triggered by rising tariffs. Downgraded economic outlooks include estimates from JP Morgan, Moody’s Analytics and elsewhere, including the Kalshi betting market, which is now pricing in a 66% chance of a recession sometime this year. Goldman Sachs advises: “If most of the April 9 tariffs do take effect, then the effective tariff rate will rise by an estimated 20pp once those increases and likely sectoral tariffs take effect, even allowing for some country-specific agreements at a later date. If so, we expect to change our forecast to a recession.”
Fed Chairman Powell discussed a hawkish pivot for monetary policy on Friday, according to Tim Duy, the chief U.S. economist for SGH Macro Advisors. “We anticipated Powell would lean hawkish Friday, but he went a step further even as equities were crashing, and market participants may have missed a key insight, scary as it might be,” Duy wrote in a note to clients: “To be sure, there is no explicit talk of hikes now, but hikes are no longer explicitly excluded. Powell knew markets were in free fall when he made this change. That’s not being tone-deaf. That’s being deliberate.”
JP Morgan CEO Jamie Dimon warns that tariffs look set to drive up prices. Writing in his annual letter to shareholders published today, he advises: “The recent tariffs will likely increase inflation and are causing many to consider a greater probability of a recession. And even with the recent decline in market values, prices remain relatively high.”
The current drawdown for US stocks will take a bit more than a year for the market the recoup, based on the historical average recovery period, notes TMC Research, a unit of The Milwaukee Company, a wealth manager. The estimate is based on the current 17.3% S&P 500 drawdown as of 2:45pm on Friday.
