More Clarity on Tariffs for the Market

By Hightower Omaha on April 15, 2025

Week of April 14, 2025

1. Phones, Computers, and Chips are Exempt from Tariffs

Over the weekend, we received further clarity that tariff-related easing is coming for investors. Markets feared that China’s 145% tariff would impact big tech, such as Apple (AAPL), who produces a majority of its products in China. The decision exempted smartphones, computers, and other electronics such as semiconductors, solar cells, televisions, and more.[1] The White House released a statement on the announcement, stating that exemptions were made to ensure that companies have time to move production to the U.S. Following the news, the White House did not confirm an effective all-in tariff rate on China given the new exclusions.

The technology sector is 30% of the S&P 500, and many of these companies have ties and manufacturing in China. The news should support markets in the short-term, but the administration was quick to mention that the exemption will be “short-lived”. In an interview on Sunday night, Secretary of Commerce, Howard Lutnick, said that the decision is temporary and that these items will be subject to a semiconductor tariff, which will be coming in one to two months.

In 2024, the U.S. imported $127 billion worth of electronic equipment from China.[2] The cost of these goods would have risen by over 100% if exemptions had not been made, and companies like AAPL would have had major decisions to be made – either passing higher costs onto consumers or lower margins and thus profit. For now, markets have some clarity that these products are exempt.

Chart 1: The U.S. and China Trade War, Visualized[3]

2. Forgotten Economic Data

Amid a record week for the stock market in terms of volatility and news, last week’s positive economic data was lost in the noise. The March Consumer Price Index (CPI) came in much cooler than expected at 2.4% y/y versus the expected 2.6% y/y and declined 0.1% m/m. Core CPI, excluding food and energy, rose 2.8% y/y, also below estimates. This was the first time since March 2024 that CPI declined m/m, and Core CPI is below 3% for the first time in four years. The Producer Price Index (PPI) also came in much cooler than expected at 2.7% y/y relative to the 3.3% y/y estimate. Both of these reports should give the Fed the clarity that inflation is continuing its descent lower to 2%.

In other good news, the labor market remains in good shape, with the four-week moving average for weekly initial jobless claims at 223K. The Fed has a dual mandate, being stable prices and full employment. The labor market is in good shape, and inflation is progressing toward their goal. We are not convinced the Fed will cut in May, but if inflation continues to come down, that would be a good signal for cuts in the back half of 2025. There is a 20% chance that the Fed cuts interest rates in May and a 63% chance they cut in June.[4]

3. Fixed Income

U.S. Treasury yields rose significantly across the curve last week as investors pulled back from U.S. assets after tariff rates imposed on China rose to 145%, and China retaliated with tariff increases to 125% on U.S. goods. As a result, the 2-, 10-, & 30-year yields were higher by 31, 50, & 46 bps, respectively, marking the sharpest weekly increase in over two decades.

Investment-grade bond issuance decelerated last week, marking the second-lowest weekly volume of 2025. Over the past four years, April issuance has averaged $97 billion. However, with just $15 billion issued in the first two weeks of April, current activity significantly trails the historical average.

Credit spreads were mixed across investment-grade and high-yield segments following Trump’s announcement of a 90-day pause on reciprocal tariffs excluding China. Investment-grade spreads widened by 3 bps to +161 bps, while high-yield spreads tightened 35 bps to +459 bps. On a YTD basis, investment-grade spreads have risen 42 bps, and high-yield spreads have risen by 136 bps.

Tax-exempt yields were higher across the curve last week, outpacing Treasuries as yields were higher by 60-66 bps. In April, the AAA 10-year Muni curve increased 43 bps compared to 26 bps for the 10-year Treasury. The Muni-to-Treasury ratio, a key metric for assessing the relative value of municipal bonds, has continued to rise, offering an opportunity for municipal investors with compelling entry points and attractive yields.

4. The Week Ahead

Earnings – Monday: GS, MTB; Tuesday: BAC, C, JBHT, JNJ, OMC, PNC; Wednesday: ABT, CFG, CSZ, KMI, PLD, TRV, UAL, USB; Thursday: AXP, DHI, FITB, HBAN, KEY, MMC, NFLX, RF, SCHW, SNA, STT, TFC, UNH.

Economics – Tuesday: Import Prices; Wednesday: Retail Sales, Industrial Production, Business Inventories; Thursday: Building Permits, Continuing Jobless Claims, Housing Starts, Housing Completions.  

[1] Source: CNBC. As of April 14, 2025.

[2] Source: Trading Economics. As of April 14, 2025.

[3] Source: Reuters. As of April 11, 2025.

[4] Source: CME Group. As of April 13, 2025.