Despite all the gloom surrounding US tariffs

Fears that President Trump’s tariffs would send the US economy careering into a deep and prolonged downturn have receded somewhat in recent days. News that the US and China had struck a trade ‘deal’ over the weekend, which will see tariffs lowered to pre-Liberation Day levels for at least 90 days, has significantly brightened the outlook, and we are now taking the ‘under’ rather than the ‘over’ with regards to a 50% shot of a US recession in 2025.

It remains early days, but economic news is holding up quite well, despite the trade uncertainty. Initial jobless claims (229k) are showing no signs of a blowup, while retail sales (+0.1% vs. 0.0%) slowed in April, but came in above expectations. Industrial production came in flat in April, but the sector’s small contribution to GDP means that investors largely overlooked the data.

Market participants will be closely watching this afternoon’s data on Michigan consumer inflation expectations. Both the 1- and 5-year ahead prints shot up to record highs in April off the back of Trump’s tariff announcements. Yet, with the White House abruptly softening its stance on the tariffs since then, we would expect a moderation in both indicators this month.