FX.co ★ German 10-Year Bund Yield Falls Below 2.8%

Germany's 10-year Bund yield declined to under 2.8% on Thursday following the announcement by U.S. President Donald Trump of a 25% tariff on imported vehicles. This development poses a significant challenge to Germany's automotive-centered economy, as nearly 25% of the EU's vehicle exports are destined for the U.S., which stands as Germany's most crucial automotive export market. The proposed tariffs, scheduled to be implemented on April 3, coincide with Trump's broader initiative to introduce reciprocal duties aimed at mitigating contributors to the U.S. trade deficit. This action increases economic uncertainty and exerts additional pressure on European growth, as it escalates costs throughout supply chains. In response, the EU is preparing retaliatory measures, including its robust anti-coercion mechanism—a key component of its enhanced trade-defense strategy since Trump's initial term. Amid fears of intensified trade tensions, traders have adjusted expectations, now anticipating a reduction in ECB rates to 1.94% by the end of the year, down from the current 2.5%, and a decrease from the 1.98% predicted on Wednesday.