DJT Announces 90 Day Pause on Most Tariffs After Bond Market Starts to Unravel

Although Donald Trump has not been bothered by falling stock markets, Treasury yields began moving at a worrying pace toward failure, indicating the USA’s entire role in the global financial system was in danger of collapse. Trump paused tariffs against most other countries for 90 days, with the exception of 145% against China.

USA stock markets responded with a delirious rally.

The market for USA Treasury bills stopped unraveling but did not appear to return to normal.

When stock markets look too risky, investors usually move their money into T-bills which have long been regarded as one of the world’s safest investments, backed by the full faith and credit of the USA government. This time, as stock markets looked more and more dire, major holders of T-bills began selling them.

This was not sell-off in a panic. It was measured, steady offloading of the USA’s bonds to bleed the market.

Selling Treasury bonds is how the USA finances its debt. When confidence in the USA falls, investors are more reluctant to buy such debt unless its yield rises, which forces the USA to pay higher interest on its debt. Financing the debt becomes more expensive. If investors ever sell off their bonds and refuse to buy more, the USA cannot borrow any more and cannot do the deficit spending its unbalance budget requires. In response to this, the value of the USA’s dollar falls against other currencies, adding further pressures on trade. The USA has to spend more for its imports and other countries spend less to obtain USA exports.

Other countries hold $8.5 trillion in USA debt. Major holders include the EU nations ($1.5 trillion), Japan ($1 trillion+) and Canada ($350 billion). Canada’s Mark Carney, who recently stepped up to become Prime Minister, quietly spoke with leaders of such other countries to coordinate their measured sell-off of USA debt.

For the day, stock markets finished at:

• Dow Jones Industrial Average up 2,962.86 points (7.9%) to 40,608.45
• S&P 500 up 474.13 points (9.5%) to 5,456.90
• Nasdaq composite up 1,857.06 points (12.2%) to 17,124.97
• Russell 2000 index of smaller companies up 152.45 points (8.7%) to 1,913.16

Click here for more details about where the stock markets finished.

Click here for Dean Blundell’s explanation of the coordinated pressure other countries put on the USA’s bond market to force Trump’s hand.