April 14 (Reuters) - German government bond yields rose on Monday after the U.S. administration granted exclusions for Chinese electronics from steep U.S. tariffs, easing fears about the adverse impact of U.S. trade actions on the global economy.

The U.S. said it would exempt smartphones and computers from the tariffs, providing a potential reprieve for major technology firms. However, President Donald Trump said levies were likely at some point.

Germany's 10-year yield - the euro area's benchmark - rose one basis point to 2.54%, after dropping 5.5 bps on Friday.

"Trump's partial climbdown on tariffs does not improve the outlook much," said Barclays in its macro wrap.

"We still think the U.S. will tip into recession in the second half of 2025 amid intensified uncertainty, higher cost-push inflation and retaliation from trading partners," it added.

U.S. 10-year Treasury yields were down 5 bps at 4.44% after posting their biggest weekly increase in more than two decades, as Trump's unpredictable trade policies prompted global market dislocation and forced selling.

Italian bonds outperformed German peers, with the 10-year yield down 7 bps at 3.73% after S&P upgraded its rating of Italy's long-term credit to "BBB+" from "BBB".

The yield spread between Italian and German 10-year bond yields fell to 119.5 bps, around the levels seen last week when Trump decided to pause tariffs for 90 days.

"We see further improvements in Italy's underlying fiscal position over the coming years, making further upgrades likely," said Giada Giani, an economist at Citi.

MAIN REASONS

She cited two main reasons for this forecast: the ongoing undershooting of deficit targets and the resilience of Italian government debt financing costs, which have remained stable despite market risk-off events and rising risk-free rates.

Money markets priced in the European Central Bank deposit facility rate as being 1.70% in December, versus 1.68% late on Friday and 1.9% the day before Trump announced sweeping tariffs on April 2. The depo rate is at 2.5%.

Germany's two-year yield, which is more sensitive to market expectations for ECB policy rates, rose 0.5 bps to 1.76%. It hit 1.623% last week, its lowest since October 2023.

Analysts expect the ECB to cut rates by 25 bps at its meeting on Thursday, while remaining cautious about forward guidance given the uncertainty surrounding U.S. trade policy.

"Negotiations on trade and the implementation of the German fiscal package will be crucial (for the rate outlook)," said Gregoire Pesques, fixed income chief investment officer at Europe's largest asset manager Amundi.

German Chancellor-in-waiting Friedrich Merz said he had secured the crucial backing of the Greens for a massive increase in state borrowing to bolster defence and investments.

"The fiscal package is positive for growth, but we have to see to what extent it will involve growth-beneficial investments," Amundi's Pesques added.

Barclays sees a 25 bps rate cut at every meeting from Thursday to October with a terminal rate at 1.25%. (Reporting by Stefano Rebaudo; Editing by David Holmes)