Tariffs, Talks, and Transitions
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Economics Research25 Apr 2025
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US: Trump-Fed tensions cool. Market focus has shifted from US President Donald Trump’s criticism of Fed Chair Jerome Powell towards renewed hopes of de-escalating US-China trade tensions. US Treasury Secretary Scott Bessent goes on to describe the ongoing tariff standoff—likening it to a trade embargo—as unsustainable and emphasises that the US is not seeking to decouple from China while expressing optimism that tensions could ease in the coming months. Trump has also raised expectations over a reduction in the current 145% tariff rate on Chinese imports, contingent on progress towards a trade agreement, and adds that he has no intention of firing Powell. Bessent also seeks to counter market concerns over a lack of direction in Trump’s agenda by sequencing key initiatives with a plan to finalise the extension of Trump’s 2017 tax cuts by Independence Day (4 Jul), followed by deregulation efforts.

Despite the IMF issuing the steepest downgrade for US growth among the advanced economies for 2025, the US is still expected to remain the fastest-growing developed nation. Although the IMF lowered US growth to 1.8%, down from 2.7% in January, it remains slightly above the Fed’s March projection of 1.7% and higher than Canada (1.4%), the UK (1.1%), Euro Area (0.8%), and Japan (0.6%). The IMF downgraded this year’s global growth to 2.8% from 3.3%, citing rising worries over the economic fallout from escalating tariffs and trade tensions. Here, markets are paying close attention to the high-level trade talks between the US, Japan, and South Korea. While all sides are eager to demonstrate progress toward a deal, it remains too early to determine whether substantive progress can be achieved to reduce tariffs before the 90-day pause on reciprocal tariffs expires in early July.

Hence, one cannot be too confident that the Trump administration’s more measured tone reflects genuine recalibration. Instead, they were more likely calibrated for the G20 finance ministers and central bank governors’ meetings in Washington on April 23-24. Given Trump’s fixation on maintaining leverage and “holding all the cards” in negotiations, there is little to suggest a lasting shift from his unpredictable and often erratic policy approach. Against this backdrop, G20 nations face mounting challenges navigating the coming global economic and trade activity slowdown. While this week’s meetings offer a platform for dialogue, the path to meaningful cooperation will likely prove elusive. Given the competing forces at play, the recent USD sell-off may transition into a more consolidative phase rather than a sustained reversal. The tug-of-war between Trump’s unpredictable policymaking and the reality of slowing growth amid fragile risk appetite may limit clear directional conviction in the near term.

Figure 1: Fed expects US to be the fastest growing developed nation

Source: Bloomberg, DBS




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