?? Deportations, Tariffs, and Federal Job Cuts: The Downward Pressure on Interest Rates ??

As discussions around Trump’s tariffs, mass deportations, and federal budget cuts dominate political and economic debates, these policies could significantly influence Federal Reserve actions and the trajectory of the 10-year Treasury yield. Here’s why:

1? Mass Deportations: Economic Ripple Effects

Deporting millions of undocumented immigrants would disrupt industries like agriculture, construction, and hospitality, creating labor shortages and reducing consumer spending. The economic slowdown caused by this contraction could increase unemployment 2-3% while also increasing deflationary pressures, forcing the Fed to lower rates to stabilize growth.

2? Tariffs: Slowing Growth

While tariffs are designed to protect domestic industries, they often reduce growth by increasing costs for businesses and consumers. While this initially has a short term inflationary impact, it ultimately weakens demand/consumption due to increased pricing and places additional downward pressure on rates, as the Fed adjusts to avoid a recession.

3? Federal Job Cuts: Deflationary Spending Reductions

Cutting 2.3 million federal jobs to reduce the deficit would simultaneously raise unemployment 1-2% and remove over $200B in government-driven spending from the economy. This double deflationary effect would further slow growth and add pressure for cut rates to stimulate the economy.

What Does This Mean for the 10-Year Treasury?

• A combination of higher unemployment, slower growth, and reduced inflationary pressures could push the Federal Reserve toward an accommodative stance, leading to lower short-term rates.
• Lower Fed rates and weaker economic growth would drive down the 10-year Treasury yield, reducing borrowing costs but signaling economic caution.

For investors in multifamily and other rate-sensitive sectors, this dynamic could present opportunities in refinancing and acquisitions, but it’s crucial to prepare for broader economic uncertainties.

Comments or questions? Let me know below.

With Gratitude,

Joseph Bramante

CEO- TriArc Real Estate Partners

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