Trump has to get a baking sail in his trade war, now that first investors are losing their confidence in American creditworthiness

The market has won the first blow to the White House. After a week of rapidly increasing unrest in the global economy and thousands of billions in losses at the stock exchanges, Donald Trump suddenly announced on Wednesday afternoon that the US is ‘pausing’ their import duties for ninety days. The American president thus achieves a baking sail in his global trade war, which he unleashed last week by high reciprocalTariffs‘To announce to input products from around sixty foreign countries.

However, Trumps provisional capitulation has an important exception: China. With America’s large geopolitical rival, he escalated the trade conflict on Wednesday morning precisely by increasing the taxes on Chinese input to 125 percent. In the days before, he had already raised this percentage in different steps to 104 percent, after the Chinese returned with their own higher levies on American imports.

Although the trade war between the two largest economies in the world is going into a new round, investors enthusiastically responded to Trumps temporary ceasefire with the rest of the world. American stock prices sprayed up just as fast on Wednesday as they had plumbled in the past week and made up for a good part of their losses in a few hours with record winsts.

Roaring statements

For many, Trumps U-turn came in politics and business world as a big surprise. In recent days, high government officials and the president himself had repeatedly denied that the taxes were a negotiating instrument. They dismissed the rapidly growing unrest among investors, companies and consumers as temporary pain. In roaring statements and slick films on social media, they stated that the high tariff walls were already attracting thousands of billions of dollars in foreign investments to the US.

The American manufacturing industry was on the eve of a new Golden Age, they promised. And the treasury would pick up 2 billion dollars extra daily thanks to the rates, she charged them. Without saying that these are paid by American importers – and ultimately also partly by American consumers in the form of higher prices.

Skepticism about the negative consequences of his taxes, Trump resolutely waved away for a week. « Don’t be weak! Don’t be stupid! » He wrote on social media on Monday. Those who panicked were a ‘Panican’, a play of words that rhymes with Republican in English.

Because even in his own party, there was increasingly open criticism of Trumps course from the weekend. Even him well -minded billionaires, including his adjutant Elon Musk, took his protectionism openly as an internationally operating businessmen. The most important top banker of the country, Jamie Dimon by JPMorgan, warned in an interview on FOX Business, one of Trumps regular TV channels, that « a recession is now the most likely outcome ».

Tactical withdrawal

Half a day after the taxes had started formally in the night from Tuesday to Wednesday, they turned out to be a negotiating weapon. And with his escalation against China, Trump seemed to want to somewhat mask the face loss of that turnaround and to mobilize the rest of the world against Beijing. In a message on social media, he blamed Beijing « a lack of respect for the global economy. » « I hope that once, hopefully in the near future, China realizes that the scam of the US and other countries is no longer sustainable or acceptable. »

Also in a conversation with the press, the president in the Oval Office tried to give a positive twist to his tactical withdrawal later in the afternoon. Trump spoke lightly about the criticism from his own circle: « They got a bit jumpy, you know, they became a bit anxious. »

According to him, he had changed his mind because « more than 75 » governments already reported to him last week. They would be willing to give the US more favorable trade conditions in exchange for lower or no levies. He now wants to negotiate ninety days about this and in the meantime he will ‘only’ count a basic tax of 10 percent, which came into force on 5 April.

Election promise

On April 2, Trump had announced his trade war with a lot of bombing. During an event in the Rozentuin, which he had baptized « Liberation Day », he unveiled a list of so -called reciprocal taxes for dozens of trading partners, who would « disadvantage » or even « turn a leg » for decades.

These ‘Tariffs’ varied from 10 percent for, for example, the United Kingdom, to 20 percent for EU countries and up to almost 50 percent for some ‘worst perpetrators’ in Southeast Asia and Africa. These percentages were based on a dubious calculation, in which the trade surpluses of those countries with the US were taken as the starting point.

Trump solved an endlessly repeated election promise. As a businessman, he already performed in the 1980s on the way in which foreign trading partners would treat the US unfairly – then Japan.

In the financial markets and stock exchanges worldwide, the shock about his opening salvo was nevertheless great: in some very volatile trading days American companies lost a total of around $ 7,000 billion in market value. The Bitcoin also fell sharply, while Trump, as a candidate and president, has sought increasing support in the crypto community.

Bond market sent to

What Trump also seems to have given the last push was a highly unusual phenomenon that took place from Tuesday: a plummeting interest in American government bonds. Normally in times of financial unrest, they are a ‘safe haven’ where investors like to hide. On Tuesday they were dumped and the ten -year interest rates jumped up with dozens of basic points.

For trust in American creditworthiness this was already drawing a wipe, but also a political problem for Trump. The US already has a high national debt and the interest charges are already more than the defense budget. These weeks, Trump is trying to get huge tax cuts by getting the congress. Against the sense of tax hawks in his party, they will increase the (already high) budget deficit. The unrest on the bond market threatened to get this financing hole even greater too later.

But above all, the ten -year interest rate is leading for many other interest rates: which would also make borrowing for companies and citizens more expensive. The former real estate investor Trump, who largely built his business empire on debts, knows this as few others. “The bond market is bad tricky« He said Wednesday. » I looked at it … and people got a little nervous. « 

Few market parties reassure the fact that the unleashed Trump has been corrected (temporarily). Even after his reversal on Wednesday, the interest rates continued to climb on long -term American national debt.

Trump and his entourage will continue to present him as a brilliant ‘deal maker’. But by flirting so carefree with a recession, letting global trade flows stop and put the creditworthiness of his own government at stake, the rest of the world will continue to regard him as an unprecedented economic stress factor after this week.

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