Trade War Update: Trump's Tariff Playbook Returns

Trade War Update: Trump's Tariff Playbook Returns

President Trump announced new tariffs on the EU over the weekend, directly tied to his push to acquire Greenland. Here's what you need to know:

The New Tariffs: A 10% tariff on Denmark, Norway, Sweden, France, Germany, the UK, Netherlands, and Finland takes effect February 1st. These tariffs jump to 25% on June 1st and will not be lifted until a deal is reached on the "complete and total purchase of Greenland."

Why This Matters for Rates:

Tariff announcements create uncertainty, and uncertainty usually sends investors running toward the safety of bonds. Normally, that would push bond prices up and yields (and mortgage rates) down. But here's the catch: tariffs also raise inflation concerns because they make imported goods more expensive. That fear of future inflation can actually push rates higher, which is exactly what we saw today. This is exactly why rates jumped today.

The Pattern to Watch:

If you followed the trade war headlines last year, you'll remember this playbook. Trump leads with a tough threat, markets react emotionally, then negotiations happen and deals eventually get made. The April 2025 tariff pause is a perfect example. When the 10 year yield started spiking above 4.50%, Trump pulled back. He's said publicly that he watches the bond market closely. The Bond Market is king.

The Bottom Line for Housing:

Volatility in the bond market means volatility in mortgage rates. Expect some choppy weeks ahead as this plays out. The good news is that historically these trade tensions have resolved with deals before the tariffs fully take effect. The Greenland ask is bigger than previous negotiations, so this could drag on longer than past episodes.

For now, keep clients informed that rate movement may be unpredictable in the short term. If we see yields climb well above 4.50%, history suggests the administration will likely ease up on the pressure. Stay tuned and stay ready.

See below for where we stand right now:

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