'Peak' tariffs, Trump puts and bond vigilantism

Why the tariffs are disinflationary

Last week, we suggested the outcome from the Geneva talks would be enough for markets to hang their hat on and so it was. Market participants want to believe the trade war will be resolved, even if at higher tariff rates. However, the endemic uncertainty of the trade war will continue to be a major headwind for global equities. This FT chart of the evolution of US-China tariffs since February helps illustrate the uncertainty:

The 115 percentage point reduction in bilateral US-China tariffs for 90 days while trade talks continue was enough to inspire a surge in US equities, despite leaving in place a 30% US tariff rate on China. That was somewhat lower than the 37% weighted average expectation for the 'final' US tariff rate on China in the latest BoA Fund Manager survey, which might account for some of the positive market reaction.