Trump pauses tariffs under pressure from bond market
- The U.S. bond market reacted negatively, driving bond yields to significant highs, prompting fears of a debt crisis.
- President Trump reversed course on tariffs after a week of market instability, specifically influenced by bond market activity.
- The bond market demonstrated its power, signaling that the administration's tariffs could not withstand fiscal pressures.
In recent events in the United States, President Donald Trump announced a 90-day pause on tariffs affecting most countries except China. This decision followed a week of tumult in the global markets, notably spurred by alarming shifts in the bond market. As U.S. Treasury bond yields surged, particularly for the 10-year and 30-year bonds, concerns escalated regarding potential debt crises. Trump's tariffs had initially prompted stock market declines which his administration had previously dismissed. However, the significant sell-off in bonds, driven by a lack of investor confidence, forced the White House to reconsider its tariff strategy. The bond market's reaction was critical as it demonstrated that fiscal and monetary policies could lead to dire consequences for the broader economy, compelling the administration to pivot in its trade policies—a move characterized by sources within the White House as capitulation rather than a strategic negotiation or deal-making success. Economists, including Fox Business correspondent Charles Gasparino, highlighted the bond markets' influence in this situation, suggesting that the financial system's stability was at serious risk, leading to this abrupt policy change.