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While tariffs on China have declined from 145% to 30%, the headwind to corporate earnings from tariffs remains significant because of the overall jump in the average tariff rate from 3% in January to 18% today, see the first and second chart below. We are already beginning to see weakness in the economic data with a significant decline in the earnings revisions ratio since Liberation Day, see the third chart.
Sources: White House, China Ministry of Finance, Macrobond, Apollo Chief Economist 
Note: Includes IEEPA tariffs on Canada, Mexico, and China (with USMCA exemptions); April 2 “reciprocal” tariffs; and steel, aluminum, auto, and auto parts tariffs. Tariff revenue estimate uses an elasticity of -0.997 and a noncompliance rate of 8 percent. Sources: US Census Bureau; Historical Statistics of the United States: Colonial Times to 1970, Part II; US International Trade Commission, “U.S. imports for consumption, duties collected, and ratio of duties to values, 1891-2023, (Table 1)”; Tax Foundation calculations; Apollo Chief Economist 
Note: Earnings revisions ratio measures how many upward revisions to earnings estimates analysts are making versus downward revisions over a given period. Above 0.5 more upgrades than downgrades and below 0.5 more downgrades than upgrades. Sources: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The Covid-motivated pause on reporting delinquent federal student loans has now ended. As a result, starting in May 2025, up to 10% of US households may face a steep decline in their credit score, see chart below. This means they will no longer be able to get a loan to buy a car, a house, or new furniture. Combined with tariffs and high uncertainty, this is a significant headwind to consumer spending over the coming months. See here for more discussion from the New York Fed.
Sources: Federal Reserve Bank of New York, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The trade war is making products more expensive at Walmart, student loan payments are restarting, and the Moody’s downgrade is pushing up borrowing costs for consumers and firms. The list of headwinds is growing, see below.
Source: Apollo Chief Economist See important disclaimers at the bottom of the page.
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Indirect bidding in Treasury auctions refers to bids submitted on behalf of foreign institutions. These bidders don’t participate directly, but instead have their bids placed by intermediaries—hence “indirect.” Looking at foreign participation in 30-year Treasury auctions shows a downward trend in recent months, see chart below.
Sources: Bloomberg, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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US data centers are currently powered mainly by gas and coal. The IEA is forecasting that this will change over the coming years with renewables playing a much more significant role, see chart below.
Sources: IEA, Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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See important disclaimers at the bottom of the page.
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The latest IMF WEO forecast shows that Germany and France, over the coming years, will have bigger fiscal deficits than other EU countries, see chart below.
Sources: International Monetary Fund (IMF), Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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When you buy a new t-shirt in Manhattan, some of the money goes to the manufacturer in China, and some of the money goes to the US company that sells the t-shirt.
Looking at the distribution of expenditures on imports shows that for China, 56% of the money paid stays in the US, and 44% goes to China, see chart below.
The bottom line is that more than half of the money paid for US imports from China stays in the US.
For more discussion, see also here.
Note: Chart shows how expenditures on imports are distributed between local content that stays in the US and the imported content that goes overseas to the trading partner. Sources: Federal Reserve Bank of San Francisco, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Currencies normally move around with interest rate differentials. For example, when the Fed keeps interest rates higher for longer because of higher inflation, the US dollar goes up.
Since the trade war started, this relationship has broken down. Now the dollar is driven by forces other than interest rate differentials, and the chart below suggests EURUSD should be trading closer to parity.
In other words, the dollar is about 10% weaker than interest rate differentials would have suggested.
Note: 1-year yield differential = 1-year German government bill minus 1-year US T-bill. pp = percentage points. Sources: Bloomberg, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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After the China trade deal, the probability of a US recession in 2025 is now at 30%, and the tail risk coming from a complete collapse in trade between China and the US has been removed.
Looking ahead, the key issue for markets is to monitor the speed with which confidence is restored among consumers, corporates, and foreigners. Is trust and confidence going to rebound quickly, or is it going to take several quarters or several years?
One particular area to watch is tourism. Tourism into the US makes up 10% of the country’s GDP, and the observed 30% to 40% decline in visitor arrivals from Canada and Europe is having a negative impact on US airlines, hotels, and restaurants, see chart below.
The bottom line is that markets may recover quickly from this episode. But it will likely take some time before confidence is restored among consumers, corporates, and foreigners.
Note: The series is calculated using tourism-related output as % of GDP. Tourism-related output includes the direct output from tourist spending, as well as the indirect and induced effects captured through input-output multipliers.
Sources: Bureau of Economic Analysis, Apollo Chief EconomistSee important disclaimers at the bottom of the page.
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