Trump’s Tariff Threats Fail to Shake Fed Rate Cut Expectations

Markets remain unmoved by President Trump's latest tariff rhetoric, with interest rate expectations holding steady despite threats of new tariffs on $300 billion of Chinese goods. The CME's FedWatch tool continues to price in two 25 basis point rate cuts this year, beginning in September.

Traders appear to be betting on the TRUMP administration backing down from its August 1 tariff deadline, mirroring previous patterns where threats gave way to negotiation. This contrasts sharply with March, when similar rhetoric prompted markets to price in aggressive Fed easing.

The lack of market reaction suggests investors see little risk of tariffs sparking inflation or derailing the Fed's dovish pivot. Friday's strong jobs report already erased hopes for a July cut, but September's remains firmly priced despite the trade war saber-rattling.