March 26 – Stock futures traded quietly mixed overnight as the clock continues to tick closer to next week’s highly-anticipated tariff announcements. The VIX continues to trade just above yesterday’s one-month low near 17, while the dollar index is trading near 104.3. Yields on 10-year Treasuries are trading near 4.34%, which is just below yesterday’s four-week highs, while yields on 2-year Treasuries are trading near 4.00%. Crude oil prices are trading nearly 1% higher after hitting a fresh four-week high earlier this morning, while the grain and oilseed markets were mixed in choppy trade overnight, as they bide time ahead of next week’s big USDA reports, as well as key tariff announcements regarding Canada and Mexico.
Durable goods orders rose 0.9% month-on-month in February, which is down substantially from the robust 3.3% gains seen in January, but better than the -1.0% expected by analysts. Durable goods orders minus transportation rose 0.7% on the month, up from 0.1% the previous month, and above the 0.3% expected by analysts. However, core durable goods orders, which are seen as a measure of business sentiment, came in at -0.3% on the month, down from 0.9% the previous month. So overall, durable goods orders came in better than expected in February, but there were warning flags from the business community due to the uncertainty of the approaching tariff announcements. Stock futures initially dipped on the data release, but then they turned higher once again.
Many of the markets are trading in a holding pattern as they mark time toward next week’s news dump. For most of the markets they are anticipating next Wednesday’s tariff announcements. That’s long been the date that the White House has stated that it will release reciprocal tariff rates on various trading partners. It has stated that this means that we will charge trading partners what they charge us, for the desired purpose of seeing them come to the table to reduce tariffs. More than 100 countries do not charge a tariff to the United States, but unfortunately, most of our major trading partners do so. The reciprocal tariffs could be very disruptive to the economy if they do not result in reduced tariff rates, but they could actually stimulate growth if they do result in reduced tariffs in the long run. Thus, another unknown for a period of time.
We should also hear next week how the Trump Administration will treat the tariffs already applied to Canada and Mexico, along with China. I don’t expect any easing of tariffs on China, although they could actually be stiffened somewhat. I interpret the lack of criticism of late about Mexico as a sign of hope that we could see an agreement soon with it. Such an agreement is critical for the future of grain, oilseed and pork trade. However, tensions with Canada remain high, suggesting that the two sides have a ways to go before reaching an agreement. Unfortunately, personality differences between President Trump and former Prime Minister Justin Trudeau – and now Mark Carney – appear to have gotten in the way of successful negotiations with our neighbor to the north, which is quite unfortunate. Regardless, I fully expect the 25% tariffs to remain in place for aluminum and steel, which will add to those tensions with Canada.
Ahead of the above, we should see USDA’s quarterly grain stocks and planted acreage reports on Monday. The odds of a market-moving surprise in these numbers are high this year – in either direction. The stocks reports are known for their market moving surprises, and the range of expectations for acreage are wide this year as well. This just adds one more unknown for the grain and oilseed markets, keeping them in a choppy sideways trading range as we move through this week’s trade.
We see more evidence that Russian President Putin may be migrating toward closer ties to President Trump, isolating Chinese President Xi Jinping in the process, as I’ve previously outlined on different occasions. Chinese auto sales previously held a 60% market share in Russia, but that is changing. Chinese car exports to Russia fell 49% in the first two months of this year, according to the China Passenger Car Association, compared to a 27% increase for 2024. Russia put tariffs of 70 to 85% on imported vehicles at the end of 2024, hitting Chinese shipments hard. Those tariffs are set to increase by 10 – 20% each year until 2030. China’s overall exports to Russia declined by 11% in the first two months of the year, after rising nearly 12% in 2024. This provides more evidence of a cooling relationship between Putin and Xi, which is raising concerns in China amid fears that Russia may move closer to the United States if a lasting peace agreement is reached regarding Ukraine. That’s on top of the economic impact of the lost exports, with electric vehicle shipments to the European Union also down by one-third after the EU raised tariffs to as high as 45%. This requires China to further “break the bank” to increase stimulus measures for its economy, which I believe is part of Trump’s strategy to contain Chinese aggression.
