President Donald Trump announced on Wednesday that he would “pause” his reciprocal tariffs on more than 75 trading partners for 90 days. The announcement helped send 10-year Treasury yields down today, though the uncertainty surrounding the Trump administration’s tariff policies have left experts unclear about what the impact will be on mortgage rates.
Instead of the individual tariff increases expected, the Trump administration announced a much lower 10% tariff on most trading partners, except China. Imports from China will now face a 125% tariff, up from the 104% tariff announced on Tuesday.
The Chinese government had also announced earlier in the day a tariff of 84% on U.S. imports that went into effect on Wednesday. Canada and Mexico were spared the 10% universal increase but will still face the 25% tariff already on goods not covered by the trilateral trade agreement Canada, Mexico and the U.S. made during Trump’s first term.
The news sent stock markets surging, with the Dow Jones Industrial Average up more than 2,900 points, its biggest rally since 2008. While Treasury Secretary Scott Bessent told the press that the seemingly haphazard tariff reversal was all part of Trump’s economic strategy, the president told reporters that he was watching the bond market and that people were “getting a little queasy,” according to The Associated Press.
The impending tariffs and ongoing economic uncertainty had sent the 10-year Treasury, which has a strong correlation with mortgage rates, on a wild ride in recent days. Amid a broad selloff, the 10-year yield had been rising since early Monday.
Many economists had predicted that if the tariffs laid out by Trump were implemented, the 30-year fixed-rate mortgage would rise as well. Laurence Kotlikoff, professor of economics at Boston University, told Time magazine that because of tariffs and the resulting inflation, mortgage rates could reach 10% in the coming years.
But Wednesday’s U.S. Treasury 10-year note auction proved stronger than expected, showing solid investor demand. The positive results helped push 10-year yields down. However, the Treasury yield was still on track for its largest weekly gain since June 2013, according to Reuters.
Mortgage rates have been ticking down in recent weeks, but only slightly. The 30-year fixed-rate mortgage had dropped from 6.67% for the week of March 20 to 6.64% for the week of April 3, according to Freddie Mac.
