09 June 2025

Tariffs and Trade Policy Continue to Put Upward Pressure on Rates

The current outlook for mortgage interest rates remains challenging, as bond markets face ongoing pressure from uncertainty surrounding tariffs and trade policies. The primary concern is the potential inflationary impact these tariffs may have in the coming months. While rates dipped slightly at the beginning of the week, they rebounded following Friday’s jobs report and are now hovering near the 7% mark once again.

As someone who has meticulously studied relevant economic data every single day since this inflation cycle began in late 2021, I can now say—nearly four years later—that it is virtually impossible to make a reasonable guess as to when mortgage rates might actually move lower. This is due, in part, to the fact that the rules of the game keep changing. Friday’s jobs report is a perfect example. For the past four years, the Fed and bond traders have consistently stated that in addition to falling inflation metrics like PCE and CPI (which have been trending down), they also want to see broader signs of a cooling economy—particularly higher unemployment and weaker job data.

On Friday, we received exactly that. ADP employment numbers came in significantly lower than expected, and the ISM Services Index echoed the same softer economic message. This is the type of data the bond market has been asking for.

Yet instead of rallying, bonds sold off, and yields rose—pushing mortgage rates higher. As a data-driven, sequential thinker, I’ll admit: it left me a bit baffled.

In the end, it’s clear that markets are looking for greater clarity on trade policy before we’ll see any meaningful improvement in interest rates. While this week brings several economic reports that traditionally influence rates—most of them focused on inflation—their impact may be muted until there’s more certainty surrounding tariffs and trade negotiations. Additionally, market movement may also track with developments related to the federal spending bill currently being debated in the Senate.

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