The US and China have significantly, albeit temporarily, reduced tariff tensions. Meanwhile, the US has started to sign tariff deals with other countries, starting with the UK. Does this mean that economic and market concerns about the trade war were overblown?
Paul and Luke speak to Lizzy Galbraith and Bob Gilhooly about why US-China decoupling is still a long-term trend, what may be next for tariff levels and how much progress the US administration is making on its other priorities, including tax cuts.
Some highlights:
Some highlights:
- Who ‘blinked’ first? The US appears to have backed down under pressure from market volatility and a public backlash. Treasury Secretary Scott Bessent has emerged as a key figure, calming markets and steering tariff negotiations.
- Decoupling delayed, not denied. While the rhetoric has softened, the long-term trend of US-China economic separation remains. Tariffs may rise again after the 90-day pause ends.
- US-UK deal. A new UK-US trade deal offers modest relief, with average tariffs barely budging. Promised carve-outs for autos and steel are vague and anticipated sector-specific tariffs—especially on pharmaceuticals—could still bite.
- Fiscal policy pivot. With trade tensions easing (for now), the Trump administration is shifting focus to his ‘big beautiful’ tax cut and deregulation bill. The goal? Reassure voters and markets ahead of the 2026 mid-term elections.
Listen to the latest episode of our Macro Bytes podcast for the full discussion.