US: Why Trump retreated to duties

That President Donald Trump pushes the United States economy to recessionit’s a fact.

The first signs are already evident with the redundancies of automotive workers in Indiana and Michigan, the sale of the stock market in recent days and the Americans to withdraw their expenditure.

But as Trump’s duties came into force, something even more worrying happened: panic in bond markets.

Investors began rejecting US government bonds. They sold and sold and sold. This is not normal. Usually, US government bonds are a safe haven.

Whenever the shares sink or there is turmoil around the world, investors are rushing to buy simply bonds from the US State. It is the equivalent of chicken soup for unhealthy markets. But suddenly, these bonds became bitter.

O Trump remembered Liz Trars

Eventually, Trump succumbed to bond markets. He admitted to reporters that « people were starting to dizzy a little » in the bond market.

She did not want to follow the fate of British Prime Minister Liz Trars, who resigned humiliated in 2022 after a similar fiasco of the bond market in response to her policies.

« I have approved a 90 -day pause and a significantly reduced mutual tariff during this period, 10%, also with immediate power, » Trump told the social networking platform.

It is finally a relief, but the possibility for more duties remains. And the dip in the bond market shows how much damage has already been caused.

The common conclusion for Trump

There are many reasons why investors (probably including some foreign governments) wanted to sell.

Some wanted to invest elsewhere in the world- others had to leave the bonds to have more cash in hand.

But, deep down, it all ended up in the same belief. According to what he mentions The Washighton Post: The United States no longer looks stable. It is impossible to get away with what Trump is doing – and it’s not worth risking to find out exactly how much they will break because of his actions.

For the United States, the impact of all of them could be significant – and almost all negative. As investors sold bonds, the yield (the interest rate) was raised.

The yield on the 10 -year state bond reached 4.51%, from 3.9%earlier in the week, and the yield on the 30 -year state bond exceeded 5%. This could not be worse for Main Street.

It means that mortgage interest rates can again exceed 7% and the cost of borrowing for cars, businesses, etc. It will be launched.

It also means that the United States government will have to pay even higher interest costs.

« The mini crisis after the day of liberation has passed to a more dangerous level overnight with a fairly large bond sale, » wrote Jim Reid, a Deutsche Bank-strategic researcher.

« This will put much more pressure on the US government than a mere stock of stock. » (Reid was right: he raised the pressure to a level that Trump could not even stand).

Shakes the trust of investors

US government bonds are at the center of almost all that is happening in the markets.

Many investments around the world are priced depending on how much more dangerous they are than US government bonds.

Trump raised the average US duty rate from about 2% to 22.5% – the highest for more than a century, according to Yale’s budget lab.

This has rocked the fundamental reputation of the US government. Investors will be cautious about giving everything to American bonds again.

Revenue from duties as a percentage of import imports. Source: Washighton Post

Even with the suspension of the worst duties, the average seems to be at least fifteen years. This is much higher than many businesses can manage.

It is too early to say if this is the beginning of the end of world US dollar domination.

In the 2000s, people were willing to proclaim the end of the dollar king. The 2008 financial crisis then struck and investors overwhelmed dollars and US bonds again.

At that time, the perception was that the United States was the strongest economy in the world and the most durable. This has proved to be true throughout the last few years.

But Trump is testing this position again and investors now have even more options than 2008.

Even the White House even

It is striking how unprepared the White House was for this result. Just on Sunday, Finance Minister Scott Bessed celebrated how low the yield on the 10 -year state bond had fallen and predicted that this could boost the rejuvenation of the housing market, as mortgage interest rates would become cheap again.

By Wednesday, Bessed was forced to go to Fox Business to reassure people around the world that this would not turn into a crisis.

« I think there is nothing systemic in this, I think this is an uncomfortable but normal dele of bonds, » he said.

Trump has now retired. But this will probably not be the last time that something unexpected will break because of the duties.