That’s my read on why the U.S. just paused the global tariff hike to 10%.
From the beginning, I’ve believed the executive branch's real goal was to push down the yield on the 10-year Treasury. Why? Because Uncle Sam has to refinance a mountain of debt this year, and the cost of that depends heavily on Treasury yields — especially the 10-year. That’s the rate that sets the tone for everything from mortgages to corporate borrowing.
So they tried to spook markets. Introduce global tariffs. Stir up uncertainty. And it worked—at first. Yields dipped. Traders moved to Treasuries as a typical flight-to-safety.
But then something flipped.
Instead of being seen as a safe haven, U.S. debt itself started to look shaky. Maybe it was the deficit outlook, maybe the global response to tariffs — but whatever it was, yields started climbing. Fast.
At that point, the strategy backfired. The executive branch had no choice but to walk it back. So they paused the tariffs.
Because when your national budget depends on cheap debt, you can't afford a crisis of confidence in your bonds.
> Instead of being seen as a safe haven, U.S. debt itself started to look shaky
There's also a more basic answer to why US debt got more expensive. There is no such thing as a "trade deficit". You cannot import something without exporting something else. That something else, in almost 100% of the situations, is dollars. What do you do with dollars, if there's nothing you want to buy? You buy debt. So, every trade deficit ultimately tends to export debt. We have long known that government debt is proportional to trade deficits.
The problem with tariffs, in this context, is that they are being used as a signal that we don't want to sell people dollars anymore, explicitly saying "no more trade deficits". In doing so we are choking off the supply of dollars used to buy debt (rather abruptly), so that US debt is chasing fewer dollars and has to give a bigger yield as a result.
What's worse, is that because we are signalling that the tariffs are meant to be permanent, and we're seeing reciprocal tariffs as a result. When that happens, it means that using dollars in the future will purchase fewer US goods, so the time discount of money has gone up too. Further driving up yields to make bonds attractive enough to sell.
US debt was mostly being bought because "safe". The US being seen as politically and economically stable and the center of the world. Right now that argument is much harder to make.
And meanwhile there is always a lot of US debt that needs to be rolled over (i.e. re-issued to a willing buyer.)
Except for the data point of today's 10-Year Treasury Auction which had a normal, usual result.
Why do people keep repeating this nonsense? 2008? Every "recession" for the last 50 years? Nobody was under the impression that the US was economically stable. Go press max on the 10 year bond yields and tell me what you see. The "crash" puts it to where it was not even a year ago. For 10-year bonds.
The main point is during every recession for the last 50 years, the US government has never missed a loan payment on its debt, even during recessions. It has a near perfect credit score.
Compared to every other developed democracy in the planet, the US is politically unstable with its two party democracy.
Trump is just a product of this right-vs-left volatile maximalism, represented as woke-vs-maga, which is fully on-track to get worse. Try guessing who will be the next woke maximalist and maga maximalist candidate, and what Executive Orders it leads to, which the US is pretty much ruled by at this stage.
Good luck with flip-flopping maga and woke Executive law as a country.
I'm not sure where you've seen left maximalism in the government so far. You get a choice between right and "let's not disturb the status quo" centrish party. There were barely any strong left-ish opinions for quite a while. That whole idea of a conflict seems really artificial, looking at the news from the outside. Let's hear about the left once someone actually manages to force through things like: more residential buildings overriding nimbys, progressive tax without trivial loopholes, wealth tax, kill gerrymandering, federal level build-out of trainlines, etc.
> the US is politically unstable with its two party democracy
How about Netherlands and Belgium? With the exception of PM Rutte (NL) in the last 8 years, normally Netherlands has a relatively unstable democracy, compared to Germany or France. Their gov'ts collapse relatively quickly, then call elections. (To be clear, [Semi-]Presidential systems like France, US, and Brazil don't have the concept of "calling elections", so they are perceived as more stable.) And don't even get me started about Belgium: Their political system is a mess. It is like 2.1 countries in one: The French speaking side, the Dutch/Flemish speaking side, and a tiny German speaking minority. At some point (2011?), the went more than 500 days (FIVE HUNDRED DAYS!) without an elected gov't, while they were negotiating to form a new one. And both NL and BE and facing serious challenges with newly powerful hard right parties (Hello Geert Wilders!). This "woke-vs-maga" story isn't only in the US. Many highly developed nations in Europe are struggling with similar divisions in their political systems.
Somewhat tangential: I see two serious flaws with the US democratic system: (1) The supreme court is too powerful. If you look at many other highly developed, democratic nations, their supreme court (or equivalent) is much less powerful, and they are no worse for it. I have seen that in both semi-presidential and parliamentary systems. (2) The US president is too powerful.
But the country is polarized. So this woke/MAGA maximalist seesaw is what you’d expect if democracy was working.
The two-party angle really has very little to do with it, because there’s not that many “true moderates” in the electorate. Research shows that the “center” is comprised of people with a heterodox mix of views, but they’re not particularly mushy about any specific view.
Well I can accept that argument, it's interesting, but I think I want to disagree. I'm not American, I'm French and I live in China, and in both countries I know so well, the population seem to have many spectrums: young vs old, moderates vs angry, rich vs poor, nature-driven vs success-driven, tired vs energetic etc. So with all those dimensions, France ended up with 12 parties at the presidential election, from royalists to anarchists, going through greens, communists, centrists etc. China ended up with one.
France embraced the chaos and made it a point of pride, while China finds it absolutely terrifying and unproductive - but my point is that the population is exactly the same, scarily similar, in all its funny diversity, but the system is not a mirror of it, just an awkward model built on compromises: France wants to maximize representability and China wants to maximize order.
The US system is pragmatic: need to win, need to give the people a feeling of choice but not give them any sort of real power of structural change, and they split on a strange line, for most of the world, that I have even trouble to describe myself. I think Trump pleases people there because he pretends to be a structure reformist, which sounds fresh.
It's not the people who can't be diverse politically exactly, it's more complex.
The 2 party system has existed for the vast majority of the time the country has been around. Now isn't even the most polarized period of it (though it's certainly up near the top). It's not always worse the next round but it's not always better the next round either.
As a card-carrying Whig party member I take offense to this. US has had periods of 3 parties, where the 3rd party ousts the 1st or 2nd eventually and we're back to two party, though that's more 1800s.
This is a product of duopolistic parties AND social media algorithms. Outrage. Outrage gets clicks, gets money, gets votes.
The C and the I are at war, R is stuck in a vietnam in Ukraine and South Africa is unstable .Leaving Brazil, which yes, brazil and India alone may hold up a stable reserve currency .
Is it? They have some intra-government spats, but I hadn't heard that this threatened the stability of the whole country yet.
> which yes, brazil and India alone may hold up a stable reserve currency.
Also several other countries which joined the last year or are in the process of joining. I believe at some point, the official name was also changed to BRICS+
I seriously doubt Brazil will keep it up if Trump follows through with his threat. Honestly I'm surprised Brazil hasn't been hit hard yet. Brazilian taxes on american products can approach 100%. One for me and one for the government, as we say. A "reciprocal" 10% tariff against brazilian goods is just comical to me. I wish I was paying just 10%.
The biggest things that our dumb oligarchs here profit from are almost 0 or zero.
It's only the shit that we want to buy retail on Amazon US that are crazy expensive. And a big chunk is ICMS, that is state wide, not federal tax.
On top of that DHL charges a premium.
I know because sometimes I can buy directly using my prime subscription my beloved Nintendo games (that I hope I can buy directly from Asia now and cut one big middleman).
Brazil's deficit in the last decade accumulates hundreds of billions USD already, but only benefits a few. Yet as a good dogs we feel relieved that is only 10%. But you forget our biggest export products are already 35% on top what was before (steel).
This is a oligarchy fight that will splat on everyone, including my eggs since we quintupled the exports to cover someone's asses.
By the way, why do we need to buy expensive ethanol abroad since ours is cheaper, but in my state ethanol is never cheaper than gasoline?
Having dollar being the worlds currency is not necessarily a good thing. Yes, you can borrow at low interests rate for a while. But guess what? Those are still debts. And eventually rates rise due to inflation. Now you have hollowed out your industrial base and you are stuck with tons of debts.
Even if dollar gets weaker, better to have less debts and more industrialization
Inflation and the "hollowing of your industrial base" are not inevitably connected, and in the case of the USA, have almost no connection to each other at all.
This is all correct, but it's a first principles explanation that doesn't explain why US bonds, and in particular the 10-year note, spiked today. Yes, eventually excessive tariffs would have that result. They literally hadn't even taken effect yet. So this doesn't explain the bond motion today.
Someone was dumping, we don't know who or why. But the answer to that question is a lot (a lot) more important than people realize, and certainly more so than the immediate market motion or tariff policy.
Honestly if the answer was "The PRC was unloading bonds to send a message" that's sort of the best option, as they have limited wiggle room to continue to do so without wrecking their own financial situation.
If it's "The market as a whole lost confidence in US debt", then we're fucked no matter what Trump does next.
The problem is that China holds only 2.6% of US Debt as of February 2025. Can they leverage that small a percentage to make a market move like that? Especially assuming they didn't dedicate all of their holdings to that action?
You know what the answer is. It’s the global system dumping US debt. Its not like someone knew THIS would be the specific smoke signal that Trump would see and say “oh, lets pump the brakes”
Reversing idiotic decisions after not being able to explain away the backlash they caused is kind of his thing and many people recognized it and expected it before the tariff pause.
I think it’s largely irrelevant now. The cats out of the bag and any country holding large amounts of t-notes and facing hostility from the US will dump them to get Trump to back off.
> we are choking off the supply of dollars used to buy debt (rather abruptly), so that US debt is chasing fewer dollars and has to give a bigger yield as a result
Well, also, the holders of our debt now need liquidity. So they sell this famously-liquid asset we've been selling them for decades.
It's usually not "dollars." It could be any investment or service that could be bought using dollars. And calling foreign investment an "export" is just confusing.
> You cannot import something without exporting something else.
This is incorrect when your national currency happens to be the global reserve currency. All it requires is for the other country to be willing to accept dollars in payment.
[ EDIT: even that's wrong. All it requires is someone being willing to accept dollars, either in payment or as part of a currency exchange. ]
Exporting dollars is exporting something. Combine a constantly depreciating dollar with constant rates of trade and you could end up in a steady state.
However, we define trade deficits to exclude financial transactions for various reasons.
Normal economics does not talk about "exporting currency". You generally buy stuff with currency, which when the seller is in another country happens to mean that dollars (probably) move across borders and thus in some odd sense the currency is exported. But this is really not what is generally said in this context. Exporting stuff normally means providing goods and services to willing buyers in other countries.
Normal economics almost certainly does talk about exporting currency. It’s a key point in freshman macro economics, and central to modern keynseian theory. And while there are some solid alternative to keynes, I doubt that even hayak would claim that you can’t export currencies.
Maybe my google-fu is not that great today, but I could no reference to exporting currency online that was about the concept that paying for imports was exporting currency.
You’re not going to see it used in such terms because of how economics defines trade. However you will see examples that make it clear currency is a commodity subject to supply and demand when you look into exchange rates. https://www.investopedia.com/ask/answers/041515/how-does-bal...
Trade networks allow for stable equilibriums with no individual country having equal trade with any other county. To simplify, A on net sends money to B, and B buys stuff from C with A’s currency, C then buys stuff from A in A’s currency returning that money to A. However, people want to operate in their native currency and there are a lot more than 3 countries in the real world so you end with intermediary currency exchanges changes going on. In theory supply and demand steps in to balance things, in practice cash flows rarely actually sum to 0.
> Normal economics does not talk about "exporting currency"
International finance is almost entirely about balancing the current and capital accounts [1].
The trade deficit is just one part of the current account [2]. Zeroing out the trade balance ceteris paribus requires a change in the capital account, i.e. foreign ownership of domestic assets and/or domestic ownership of foreign assets. If we’re just reducing the current account with tariffs, that means reducing both. Necessarily. This is one of the closest things to a law economics offers because it’s based on identities. The only run-around to it is the reserve account printing domestic currency, and we know how that goes.
Normal economics misses so many things because of narrow minded mathematical models. Like wealth and income distributions or the fact that currency is just another good with its own supply and demand.
I read it accurately. I just don't agree that "paying someone in a different country with my currency" is what is typically, normally meant by "exporting stuff".
The real issue is people are still treating this reactionary buffoonery as if it's a trade policy that warrants critique. It isn't. Trump is a fucking idiot and he has surrounded himself with other fucking idiots and they and the reactionary base of fucking idiots they've created are cheering him on for doing fucking idiot things.
A journalist successfully reverse-engineered the likely formula used to arrive at the figures for each nation, and it's not only implemented stupidly, it's also wrong from first principles. It's the same thing an actual school child might come up with if you asked them to. This is the same kind of "economic policy" cooked up by dumbasses on reddit who sincerely believe they are qualified to "fix US trade."
If our congress wasn't also packed full of ineffectual liberals and other fucking idiots, he'd be impeached by now for sheer incompetence.
It's the same issue we had in the last Trump admin. This nonsense is elevated to undue credibility by serious people discussing it seriously. It shouldn't be debated, it should be mocked, relentlessly, mercilessly, cruelly. As should Trump himself, as should his supporters, as should his sycophantic followers. Mock, belittle, make fun of, bully, parody, just continuously until every single one of these people refuses to approach a microphone.
It's especially such a farce because what do they expect? If trump said the sky is green and the ocean is red, you'd find scores of these useless faux-intellectuals trying to "prove" the truth, and each data point of evidence would simply be met with various forms of "no it isn't! The sky is green! The ocean is red!"
In their world, any "evidence" to the contrary must be manipulated or misinterpreted, because as we all know the sky is green, the ocean is -- oh, he said it's yellow now? And the sky is red? Hah, of course! We knew it all along, it was the plan, stupid!
And meanwhile...
Most of the democrats' tiny minds struggle to operate outside of a context of rigid rules and procedures. A context of arguing a point and getting at least some degree of fair debate in return.
But this is another age of populism. It doesn't matter what you argue, on either side. Debate transforms, serving only to transmit your message to your side, ideally while inspiring them and demoralizing the enemy. It matters that you seem confident and powerful while you say whatever you're saying. It matters that you seem invincible and indefatigable.
Their world won't be back for quite some time, assuming something at all like it sticks around. They'll keep operating like robots, not understanding why an excellent diss or crude mockery matters more than 1000 additional volumes of "proof" about something in contention.
These are loyalty tests. You prove you belong to the ingroup if you show you believe preposterous things. That's how cults and religions work.
We think this is stupid because it kinda is, but this behaviour is part of the human traits and possibly is adaptive behaviour to enable the very possibility of us living in large societies.
It's a great comment thank you. The part about the changes that would have enabled us to scale as society is really brilliant. I've read a bit about this in historian theories but the focus is often very material (probably because that's what you have evidence of).
I've always been in awe at the (absolutely crazy if you ask me) concept of money. The fact that we accept to give up possessions or time in exchange for the promise that anyone in the future will provide something equivalent because we just show some token/proof (which in itself are intrinsically valueless: sticks, stones, minerals, papers, now bits...).
We've been educated to be a bit suspicious and maybe show a slight contempt for it, probably to avoid being inelegant and also particularly because a lot of big owner of it are seen as not necessarily deserving of it.
But from an evolutionary perspective it's absolutely stupefying. And at its core its extremely positive. It shows absolute trust in our peers. It's probably one of the few behavior that really binds us together.
One could argue that it's the actually one trait that really distinguish us from other animals.
> I've always been in awe at the (absolutely crazy if you ask me) concept of money. The fact that we accept to give up possessions or time in exchange for the promise that anyone in the future will provide something equivalent because we just show some token/proof (which in itself are intrinsically valueless: sticks, stones, minerals, papers, now bits...).
No offense intended, but I think the way you're explaining this is a little overly silly. Value credit was a natural evolution from the barter system and it makes perfect sense. If you wanna run down to the 7/11 for a slushie, do you want to bring a $10 bill, or a live chicken? I definitely vote $10 bill, especially because there's a non zero chance the cashier wouldn't want a chicken anyway, even if it's technically worth enough to trade for a slushie. Money just streamlines this whole process and makes even exchange for goods infinitely more efficient for all parties involved, and I think that's why virtually every organized society we've found evidence of has some type of currency, going back thousands of years.
Now, that's not to say I don't agree that the monetary system as it exists is borderline a crime against humanity. Capitalism and it's various knock-on effects, starting plus or minus with colonialism depending how you want to slice it, is, I think, the most horrific thing we've done to each other in our entire history as a species. But I don't think that's an indictment of money strictly speaking.
That's the thing here. We're so used at the concept of money that you described that it's very hard to reconcile with what money really is.
You can take any introductory banking system course and it will tell the same story. (I recommend Economics of Money and Banking by Perry G Mehrling)
It's not really a finished exchange.
Money represent a debt.
It's a one sided exchange against the promise of the completion of the other side of the exchange in the future (by someone else in this case).
It's like the amount in your bank account is not really money. It's a debt from the bank: the promise that it will deliver this amount as cash if you ask. (M1)
And money is so liquid that we never think about it that way. Except during hyperinflation periods. And bank account are so solid that we think about them as cash. Except during bank runs.
As a side note, the theory that barter really meaningfully took place is being challenged as there is no real evidence of this.
Looking at the fine print of bank accounts, I would assume they completely absolve themselves of responsibility after a catastrophic event (call it C-Day). Or maybe they defer to FDIC insurance which guarantees I will have at least $250,000 after C-Day.
That said, as a consumer, I have no comprehension of how that would actually work. Do I get my guaranteed money 7 days after C-Day or 6 months after C-Day?
If an EMP blitzes my bank's electronic hard-drive records, is it my responsibility to prove I had X dollars in the account? If so, how? I can easily print a statement, but a statement clearly easily be forged. If it's the bank's responsibility, is there any guarantee they maintain physical and up-to-date records? Is there any regulation mandating they keep such records?
What happens if hyperinflation occurs and the 250,000 guaranteed by the FDIC is enough to buy a week's worth of groceries?
There's a lot of unknown variables and potential fragility in the system.
In other complex realms like software engineering, we get evidence that those complex systems really only have the budget to build the "happy path" and lawyers fight the cases when customers get damaged by the "unhappy paths."
It seems like our monetary system is on the happy path and very few times have the unhappy paths been tested.
It's the age were who control the country is the one with most money, not votes, and because company bribery is accepted, don't matter how much Trump get mocked, social media algorithms aren't going to allow that to breach other bubbles, something is clearly wrong when politians ask for money note votesz it isn't a democracy anymlre
It's the age were who control the country is the one with most money, not votes, and because company bribery is accepted, don't matter how much Trump get mocked, social media algorithms aren't going to allow that to breach other bubbles, something is clearly wrong when politians ask for money note votesz it isn't a democracy anymore
Literally the funniest thing about it is that LLMs conjure this "solution" when asked to deal with trade deficits using tariffs. It perfectly possible that one of Trump's people just asked ChatGPT and they implemented the answer.
Also the love affair with tariffs comes from a guy that wrote a book with his ideas and in that book he made up economic expert to support his views. (Ron Cara)
The guy he's referring to is Navarro, who invented an economist named Ron Vara to cite in his pro tariff book. He made up hi source using an anagram of his name, that's batshit crazy.
Sadly, this go-round it's Gen X more than Boomers. We voted for Trump disproportionately compared to other age cohorts. I'm embarrassed on behalf of my idiot friends from high school.
Incompetence is way more dangerous than people realize.
These tariffs are China's Four Pests campaign. Mao, a very trump like figure, decided to protect Chinese crops by destroying sparrows that were picking at them. Killing sparrows killed a predator of insects which did more damage to crops. This coupled with reality denying policies and ignoring experts led to one of the most devastating famines the world has ever experienced.
Hand waiving away this policy that denies reality and hurts America as a rational plan that went wrong is absolutely dangerous. Killing sparrows was "rational" in the same way these tariffs are. Authoritarians believe in power over reason. They do not like submitting to the authority of those who have studied problems because it is an attack on their own supremacy, so they fail to predict second order effects, which were likely obvious.
The damage this administration is doing to trust will be felt for generations. An agreement with America will have no value. No world leader will care what we say, they will only look at what we do. They will see power we have not as potentially being used for their own defense, but as a potential attack on their own sovereignty and they will wish to see us weakened so that they can spend less resources trying to determine our intentions.
If we're going full Mao, we'd be remiss if we didn't note that their plan for industry during the cultural revolution was "the proletariat will own small smelting operations next to their house". It checks out ideologically, workers controlling the means of production.. it just didn't work in reality.
Reminds me a lot of the thought process around having more manufacturing in the US by slapping tariffs around.
There is absolutely a Cultural Revolution feel to the communication by and around the president. See e.g. Bill Ackman's fully-prostrated worshipful response on Twitter this morning. The guy is a successful billionaire! And he needs to sound like a literal cult member in public lest he lose influence.
When everyone feels this way instead of fighting for the future they want to make reality... There are journalists, protestors, entrepreneurs, unionists, billionaires, etc, all fighting for what those history books will say. Ukrainians are fighting for what they will say right now.
I think a better question is what do you want them to say. Do you want them to say tyranny triumphed un-resisted?
The obeying in advance and reflexive glazing is scary in a Twilight Zone or slow-start-of-a-zombie-movie sort of way, but the fact that Trump is playing very fast and loose with due process, talking seriously about "deporting" American citizens and is actively applying economic death penalties to people on his bad side (like the EO stripping security clearance not only from Chris Krebs, but everyone who happens to work at his current employer) is scary in a "is the US as we know it actually going to survive this?" kind of way.
And I'm just pulling a few things off the top of Many Very Worrying Things here for brevity.
And don’t forget the Jan 6 types. They are the Red Guards of Trump and he used them on Jan 6 as an experiment. Pray we don’t have to witness a new culture revolution in our time!
Smart Trumpers are the worst of the bunch. Continuously inventing PHD 5D chess rationalizations for his actions that he immediately invalidates with his next erratic action. Better to just be along for the vibes than to pretend its a strategic, well thought out, well executed plan.
That's not the simplest possible explanation. The simplest explanation is that he did this because he believes in it. Trump has been saying the exact same thing about tariffs since the 1980s—there's video of him talking to Larry King about it in 1987, using exactly the same phrasing and logic that he uses today.
Donald Trump fundamentally believes that everything in life is a zero-sum game, and moreover that everyone is as crooked as him: either you're screwing someone else or you're getting screwed. That's why he's so obsessed with trade deficits specifically, because to him, that negative sign screams "you're getting ripped off."
There are other benefits. By imposing the tariffs like this and wielding them through executive power, he can extort countries and corporations to give him what he wants in exchanging for releasing the hostages, so to speak. And I'm sure people in his orbit _also_ used this as a get-rich-quick scheme, because these people are all grifters. But that is all secondary to the fact that he has believed this for forty years and finally got a chance to do it.
He tried to, but his advisors stopped him. Bob Woodward reported that Gary Cohn snatched papers off his desk on multiple different occasions to stop him from starting trade wars at the beginning of his first term.
This time around he has made sure there are no advisors strong enough to stop him. That means he is far more dangerous now than he was in the first term. And not just in the area of the economy.
I usually dismiss conspiracy theories, but if this were a dump and pump, it would be surprisingly clever. 3 hours before he announced easing tariffs, Trump tweeted that it's a good time to buy stocks. If he gave someone insider information, they could use that tweet as a cover.
> 3 hours before he announced easing tariffs, Trump tweeted that it's a good time to buy stocks. If he gave someone insider information, they could use that tweet as a cover.
Got a link to the tweet? I don't have a Twitter account.
Edit: apparently it is true, and it is on Truth social. Someone sent me a screenshot.
To the downvoters: what is wrong with you? It was an honest question.
If you're gonna use historical analogies, it pays off to be accurate. Marie Antoinette very likely never said "let them eat cake" and she wasn't particularly more detached than aristocrats at the time were generally (which, to be fair, is quite a lot, but not all aristocrats were killed in the revolution).
Marie Antoinette was not killed because she was particularly detached but for treason after plotting against the Constitutional monarchy of 1791 along with Louis XVI and many aristocrats at the time.
wow, fuck. unbelievable crap, but true, nonetheless:
after implying I should be accurate, you go on to make your own statements using weasel words like "very likely never said" and "wasn't particularly more detached" and more on the same lines in the rest of your comment. where is the proof for your weasel words, bro, just like you ask me to be accurate?
weasel words are not accurate words, bro, rather almost the opposite.
”physician, heal thyself” - before you fuck around advising other people what to do or not do.
i see a lot of trends of this on hn too. pathetic.
here is a similar excerpt from your same comment above, with different highlighting by me, which shows even better, your "weaselness" (for lack of a better word - maybe weaselishness or weasel(ish) nature? ):
>wasn't particularly more detached than aristocrats at the time were generally (which, to be fair, is quite a lot, but not all
laughable comment.
iow, what is evident to someone who sees beyond the surface meaning of the words you used, like I can, is that you want to attack someone verbally, without being held responsible for the consequences of your attack. in other words, you are a weakling and a coward.
that is why you waffle or equivocate.
and that is true of a lot of people, not just here but in the world. i have seen enough over my lifetime to know that that is the case.
for a very relevant and important current example, check out the news about the SignalGate scandal involving the topmost echelons of the US govt., how they fucked up, made a fool of themselves in front of the whole world, and then tried, unsuccessfully, like you, to cover it up.
jokers, and beggars, all such people.
update: wow, fuck, again.
proof. some time after writing this comment, on a whim, I thought of googling for the term signalgate, and what was my surprise, to see this Wikipedia page:
It just goes to show the notability of it, because Wikipedia only allows what they consider notable pages (according to their criteria, of course). iow, the topic is considered important by them.
It’s scary to think that the reality is as simple as “Trump is just an idiot that is incapable of understanding even the fundamentals of global trade and has been obsessed with what he thinks tariffs are for 30+ years and is too stubborn to listen to non-stupid people”, while the rest is just hopeless attempts to rationalize his stupidity. But when you’re in a billionaire bubble isolated from reality, and a dumb grifter who rips off every party in every deal you’ve ever done, it makes sense to assume that global trade is just countries ripping each-other off.
The people around him with zipped mouths who know better could very well be treating it as a pump and dump however.
Not clever, or justified, or well though out, or based on any solid evidence. But there's probably a rationale behind it.
Now, ideally, we shouldn't have to care what the rationale was if there was any way of just getting back to "normal", but the same way Mao wasn't a flash in the pan, I assume we're looking at a few decades of it for the US as well.
Or this is like the long history of American tariffs which gave it world class industry. We are in the midst of a 4th industrial revolution and all this insane manufacturing tech being developed just gets shipped over to china because nobody in the US wants to touch it for fear of failing.
For every four pests Mao had 100 successful projects that nobody talks about. Harm reduction is not an optimal strategy for any game.
The Great Chinese Famine was a famine that occurred between 1959 and 1961 in the People's Republic of China (PRC). It is widely regarded as the deadliest famine and one of the greatest man-made disasters in human history, with an estimated death toll due to starvation that ranges in the tens of millions (15 to 55 million).
That's 3% to 10% of China's population starved to death at the time.
Both you and OP are not looking at this from the right angle. The goal here is to decouple US from China. In the meantime, tariffs are raised on every country to gauge which side they are on. Once US knows who the allies are, they will negotiate to have those allies put up massive tariffs on China as well to prevent transshipping.
US wants nothing to do with China. As the biggest consumer economy in the world, the have that right.
And China has shown that agreement with them has no value. Remember that China promised trump in term 1 to massively import US goods and reduce fentanyl, in part to slow trumps tariff down. They did neither of those things. Trump hasn’t forgotten that.
Decoupling from China will lead to China annex Taiwan sooner. China will have the USA and the world by the balls then, so not sure we want that to happen quicker.
And I don't think anyone is calling themselves allies of the USA right now. The whole world is looking to decouple from the USA. Europe is completely over the USA, they can't rely on them for leadership, protection or for trade.
From a tech perspective, expect Europe to decouple from the USA from an economic and cultural perspective in the next decade. Smartest thing Europe can do is to create alternatives to US services, build its own defense industry and stop looking at the USA for any leadership.
is TSMC not currently building a plant in the US? and ASML are Dutch, so they're not at risk. I’m not saying that China taking Taiwan wouldn't be a massive strategic boon, but I don't think it would be "having the world by the balls" by any means
TSMC has not committed to a US plant that applies their most advanced technology. Currently, they are going to produce chips with larger slower features, some generations behind their state of the art -- that's commercially very useful, and a good idea, but in no way replaces the state of the art chips that they produce in Taiwan. Alas.
do you not think that if China invaded Taiwan, the top minds there would just leave and go elsewhere? the machines they use are built in the Netherlands. I know it's not quite as simple as that, but I don't think it'd be the end of the world like people are saying. I think worse would be the precedent it would set.
Other companies have the same EUV machines. TSMC also made the good decision in hindsight to make an early bet on those machines.
We know TSMC is dominant - the real knowledge of how they are doing that is in the heads of people working at TSMC. Or maybe better to say that something is missing from the competitors? Process? Management? Everything?
Cadence and Synopsys are US companies that need to know many of the technical parameters of TSMC processes. They might know more.
America only cared about Taiwan because it warehoused the exiled American friendly government that had a historical claim to power and could potentially be reinstalled.
As time goes on that becomes less and less relevant. Might be time to cut and run.
> Decoupling from China will lead to China annex Taiwan sooner. China will have the USA and the world by the balls then, so not sure we want that to happen quicker.
That seems to be over-rating the importance of Taiwan. If Taiwan sank into the sea tomorrow that'd be a catastrophe and the world would be worse off. But not that badly worse off. Life would continue. China's main global lever comes from the power of their unparalleled-in-history industrial strength and the aura of leadership they are building up internationally because they are substantially more peaceful than the US.
The peacefulness is probably not going to last, unfortunately, but until they change tack it is what it is.
No need, the United States of America already has more surface and underground nuclear test locations than any other nation on earth (IIRC), even more if atmospheric tests are included as those drifted fallout onto US ground surface.
There have been 2,121 tests done since the first in July 1945, involving 2,476 nuclear devices
has been called "the most irradiated, nuclear-blasted spot on the face of the earth".
In March 2009, TIME identified the 1970 Yucca Flat Baneberry Test, where 86 workers were exposed to radiation, as one of the world's worst nuclear disasters.
"The goal here is to decouple US from China. In the meantime, tariffs are raised on every country to gauge which side they are on. Once US knows who the allies are, they will negotiate to have those allies put up massive tariffs on China as well to prevent transshipping." You literally made this up. There has been no announcement about this from the admin. Its all just speculation.
Seeing as there is near total disconnect between what this admin says and what it demonstrably does (let alone the disconnect from reality entirely), why would anyone take anything they say at face value?
There is zero signal coming from any of these folk's mouths.
>>> US wants nothing to do with China. As the biggest consumer economy in the world, the have that right.
Yes, they have the right, but it doesn’t mean this is the right way. Consumers don’t suddenly stop consuming, and factories in the world don’t immediately start producing. This is like a slow flywheel; had we been almost spinning and ready to jump, it would make sense. This is not that.
Also, China is a super power which controls more than factories today. I agree they need to be checked, but sudden changes are not the way. I wish we did it by building trust with allies and then pushing China. Right now, even our allies are wary of us.
Isn't this bit naive? Because in order to decouple, one would expect that there would be policies to actually prepare for production inside US and then apply tariffs. Not other way around.
If the goal was to decouple from China then tarrifs would only be on China and we would encourage trade to move from China to other countries. The administrations actions have the opposite effect. It says the US is untrustworthy even to it's allies and maybe siding with China is not so bad. Note I don't like or trust the Chinese government and don't think other governments should try to get closer to them but Trump's actions make such moves much more likely
At the very least any nation that depends on the US for goods should probably be looking to other sources where possible and increasing support for them since even if the US is useful for now, we're clearly unstable and incompetent which makes us unreliable and risky.
> In the meantime, tariffs are raised on every country to gauge which side they are on
Why on earth would you be on the side of a country like this? Why we should be an ally of the US right now, if Trump can't even uphold agreements he signed himself 5 years ago? What guarantees do we have that, as soon as we decouple from China, the US won't treat us as a vassal because we gave up our only alternative? The only rational choice is to either be neutral or ally with China.
It looks like the consensus response is other countries embracing more multilateralism. This is a huge opportunity for proponents and governments that promote multilateralism to take charge and make it happen. Ex: China has restricted trade with Aus since 2020 because they, essentially, insulted China/didn't restrict their speech in ways that China wanted. This provides an opportunity for this to be rolled back, which is economically win-win (as most free trade is). Expect to see this sort of thing many times over between many countries in the world. Of course this is rooted in the fact that having ex-US trading partners is no significantly more valuable.
There is the second point to mention too though, which is that China is not exactly an exemplar of open markets and free trade, which is why you are not seeing many countries ally with China and form a united front against the US's trade rampage. Looking beyond the deranged policies, there are some truths in saying that China is a currency manipulator, has imbalanced trade to such a degree it causes problems in other economies, and even the somewhat more "far fetched" points about the unsustainability of a permanent trade deficit do have some truth on some level.
That is why, yes, you are seeing the EU normalize trade relations with China, but there are important caveats, like discussions about China having an expert quota and even internally capping production numbers within their own economy are on the table front and center. This would have never happened before, because China's strategy was to peg a low currency, export, and extinguish industries ex-China. Wish to some level is part of free trade, but it is underpinned in China with state sponsorship to a higher degrees in most trading partners are comfortable with (which is of course countered by the allure of cheap goods).
So another view would be that parties like the EU have new leverage against China that they can use to cut trade deals that strip out some of the abusive practices that made them uncomfortable in the past. If China is then willing to move on a bit from these approaches then the net outcome should be beneficial for the world of course.
I think that many players see the dangers of taking binary sides now more than ever. And indeed, skilled negotiators should see the advantages of playing these forces against each other to get what is best for them. In the face of the recent outrageous events, I would expect a sudden outburst of pragmatism elsewhere.
As an Australian who has spent decades watching the trade and resources markets it was notable that Australia, NZ, UK, Canada, and much of the world started taking calls from China and meetings with ambassadors.
The Trump plan to "decouple from China" was verging on dividing the world into the US and everybody else .. a large reason behind the partial rollback.
Countries are now openly rejecting China's offer to join hands .. but still sitting on the possibility of further deals with China should the US tariff insanity continue.
> Remember that China promised trump in term 1 to massively import US goods and reduce fentanyl
China stopped selling unlicensed fentanyl to the USofA, it later stopped supplying fentanyl to both Mexico and Canada.
The problem was that criminals in the USofA and Mexico purchased precursor chemicals in bulk and made their own fentanyl. Restricting precursors led to pre-precursors being purchased in bulk for drug labs to make their own precursors in order to make fentanyl.
The fentanyl problem continued under Trump and rapidly grew in size during his first term.
In 2021, Mr. Biden issued an executive order imposing sanctions on individuals and companies engaged in the illicit opioid trade. His Treasury Department put sanctions on more than 300 individuals and entities, freezing entire networks of fentanyl suppliers and traffickers out of the international financial system.
In 2023 and 2024 he identified China as a major illicit drug-producing country for its role in the synthetic opioid trade — a blow to the reputation of China’s chemical industry.
Simultaneously, the Biden administration pushed U.S. law enforcement agencies to conduct aggressive investigations and build indictments against dozens of Chinese citizens and companies that were trafficking fentanyl precursor chemicals into the United States.
[..] Biden secured a personal commitment from President Xi Jinping to restart counternarcotics cooperation in November 2023
[..] And we made progress. International fentanyl supply chains showed signs of disruption, forcing traffickers to change sources and tactics.
Together with other diplomatic initiatives and an expansive public health campaign, the number of lethal fentanyl overdoses in the United States has dropped.
In the 12 months ending September 2024, overdose deaths were down an estimated 24 percent from the year prior.
What has Trump done now he's back in office? Destroyed any cooperation with China on counternarcotics cooperation.
Tariffs alone will not push China’s government to help reduce drug overdose deaths in the United States. In fact, with Beijing already imposing retaliatory tariffs and proclaiming that it’s “ready to fight till the end,” Mr. Trump’s blunt-force tactics might drive China to cooperate less on fentanyl, not more.
With the stakes as high as they are, American communities cannot afford a miscalculation.
> And China has shown that agreement with them has no value
Unfortunately they still have much more value than agreements with the US and Trump specifically. Which Canada and Mexico found out the hard way.
Of course the probability that Trump actually forgot that he was the one who no signed USMCA and none of his “advisors” dared to tell him is not insignificant..
to be fair, I also made quite a lot of profit in stocks in the last few days without any inside knowledge of the whitehouse. it was a fairly safe bet that these tariffs were not going to last forever, and even if they were, there'd be reprieves
My opinion on this is that the damage has already been done. Successive administrations have already loaded up debt massively and participated in a Ponzi scheme with the Fed to pretend asset valuations in the US make sense. Sooner or later the chickens will come home to roost, and valuation multiples in the US will come to resemble those that have existed throughout history, and those which exist in all other parts of the world currently.
When this happens, there will be a big recession, and that is exactly the moment companies will start deploying AI in earnest to save money. This will create a downward spiral.
Yes, the Trump administration is incompetent. But, if you insist on blaming an administration, I would propose Obama and Biden as more reasonable culprits. It was Obama who presided over the massive Fed intervention into markets that enabled unbridled government spending increases. It was Biden who presided over the most problematic parts of the Covid response. Trump is just an idiot. Obama and Biden are actually bad guys.
> that is exactly the moment companies will start deploying AI in earnest to save money.
Companies are already deploying AI everywhere they possibly can as quickly as they possibly can. They aren't waiting for anything. AI just isn't up to the task of replacing most workers just yet. It's still unclear if it ever will be, but they're shoving AI into everything they can to see how it holds up, to see what it breaks, and to give it more data to work with so that it can hopefully be improved.
I strongly disagree with this point. History shows that most companies don't deploy cost-reduction technologies until forced to by economic conditions. When there's a recession, deployment of AI will be next level.
History shows that companies will do whatever they think will make them the most money. They aren't going to hold off on replacing workers with AI if they think that they can just because it wouldn't be nice or because it isn't recessiony enough. The very instant they think they can get away with firing you and replacing you with software they will do it.
Oh? Then how do you explain massively increased adoption of such technologies right after the financial crisis? You're assuming the world works the way people say it does in a business textbook. The real world is messy, and people don't like replacing employees unless they have to
When the economy slows down companies start getting rid of workers regardless of any technology. It's one of the first levers they pull.
Some companies looking to get rid of even more workers might search for new technologies that they hadn't considered before but which could enable them fire more people, or they might accelerate existing plans to replace workers with technology to get rid of them even sooner.
AI is different though because companies are fully aware of it and they are already moving as fast as they can. They have been salivating at the thought of using AI to fire their workers for years now and they're already making every effort to replace workers anywhere it seems feasible to do so. They are in such a hurry that it sometimes results in embarrassing failures like this one: https://www.motorbiscuit.com/airline-ai-chatbots-refund/
Like you say, the world is messy, which means there is no rule saying that companies must leave massive piles of cash sitting on the table until the economy gets bad enough for them to reach out and take it. Shareholders won't accept that. Any company that sleeps on firing their workers when AI can do the job will get absolutely crushed by their competitors who don't sit on their hands.
The Fed intervention was under Bush.
The vast majority of the "COVID response" was under Trump.
If you look at deficit spending by administration, you will also see that you have things backwards.
Yeah, I mean people love playing political games with this stuff. But the actual crime was what happened between 2009-2012. Trump is just a symptom. Yes, he's a bad guy, but what do you expect people to do?
I expect people to not vote for obviously bad guys.
Obama too had to clean up a mortgage crisis from his predecessor's careless deregulation. Not an excuse for his own crimes, like say drone striking US citizens. But Trump is just openly corrupt, inept, praising autocrats and aspiring to be one.
Obama didn't endorse ZIRP. He wanted to do more stimulus but Congress wouldn't let him.
In that environment ZIRP was the only solution. Ben Bernanke (a Bush appointee, re-appointed by Obama) devoted his academic career to how the Fed could have prevented the Great Recession. He was right.
The "actual reason" always seems to be virtuous in the end. Like "omg Trump had such good intentions!!! He just made a lil implementation booboo". It's always giving mountains of good faith to people who have lied for decades and lie today. Nothing about the clear market manipulation or greed of the party.
I don't even think the market manipulation argument stands. That gives them too much credit.
Trump's hand was forced and he had to retreat. Like the market kept having little bursts before this, based simply on the core reality that this is a trade war that the US cannot stomach without extraordinary financial damage, so everyone just kept waiting for the out. It is far more exposed and doesn't have the "cards", as Trump says, that they think they have.
The guy really, really wants his tariffs, so who knows where we even are now. He will not, under any circumstance, back down. We saw that with Canada -- various pauses, then steel and aluminum tariffs, then car tariffs, then a 25% across the board tariff for non USMCA compliant goods. First he even targeted USMCA. Based upon a lie. He desperately wants these tariffs, and as the very special person he is, he has learned absolutely nothing from today and will be back at the trough when he thinks he gets another go.
The most amazing thing are the Trump faithful who hold this as a win. This is quite possibly the most disastrous outcome of all -- the uncertainty. It is going to be economic calamity for the US.
But maybe Trump can announce that Uganda has removed a tariff or something.
I don't think the GP argued they want to balance the books.
In fact, if they wanted to balance the books, they wouldn't care about the interest rate. The only reason to bet your economy into reducing the interest is if you want to go deeply negative on the books.
> That doesn't pass muster. If they had much interest in balancing the books, they wouldn't be ripping huge holes in revenue collection.
It's not about balancing the books. It's about not making a problem far worse.
You remember the global financial crisis of 2008? The reason most of the bailed out countries requested bailouts was their bonds spiraling out of control when they had to refinance their debt. That was the primary reason they reached out to the likes of IMF and had to undergo austerity programs.
The Trump administration put the US on that path with their global tarrifs and provoking their main trading partners, specially China.
While I agree on the direction I don't think the specific argument completely holds.
The countries in this situation in 2008 where European countries that forfeited their central banks. Having relatively recently switched to the Euro made this situation relatively novel and those governments not used to not have access to this last resort tool. There was also a lack of legislation at the European level to give the central bank authority to intervene. And culturally some countries where much more scared by their recent history by the inflation risk. Which led to push backs and delays in the face or urgency. It's now probably roughly sorted at the EU level.
The USA don't have and never had this issue. The position of the FED is very clear: it will never let the US govt default. So the only risk for US bond holders is inflation (and price if they want to exit early).
They care about inflation too though. Trump is old enough to remember the high inflation 1970s well so he won't make that mistake. Kids today probably won't remember it other than an item from "ancient history" and might make the mistake, but Trump won't.
If they cared about inflation they wouldn't have instituted massive inflation causing tarrifs. Economists are saying there is a chance 70s style stagflation might come back into fashion
Any assessment of Trump’s actions that implies that he personally has a cogent strategy immediately loses credibility in my eyes. If you want to say the people around him think or feel a certain way and are influencing him based on that, fine. But he’s clearly just doing things that hit some nexus of “people around me say this will work” and “I personally, on a vibes basis, think this will be fun.”
Does he? He really wants the Feds to lower interest rates on top of everything else. He might have gotten that wish if he did absolutely nothing with economic policy and rode off the "bidenomics" he chastised for years.
There's definitely not 100% logic involved in his plans.
I would argue there are better and worse kinds of inflation. Wrecklessly printing more money is a worse kind of inflation than a new semi-optional tax, or inflation due to wages rising
The treasury department didn't print money for no reason. Stabilizing the economy during Covid is a much better reason then a pointless and stupid trade war
That's fair but I suggest that they are actually deficit hawks for the long term. In the short term, they've got financing troubles hence they care about the yield.
What if (and I realize this is an extremely pessimistic take) their plan is to just default on the debt and rely on military blackmail? Sure, there's a Constitutional prohibition on questioning the validity of USA debt, but the administration shrugs at the Constitution on a weekly basis. The endless whining about how 'unfairly' other nations are treating the US, 'ripping us off', 'laughing at us' etc is a precursor for aggressive action, and I think it's quite likely that at some point they'll come out and say 'we don't have to pay debts to countries that have been scamming us the whole time.' About one quarter of the population will support MAGA no matter what, and if things get bad enough the administration can just announce they've been 'forced' to take over Greenland and Canada.
A flashing negative warning sign of this would be issue of new kinds of Treasury securities with new complex rules.
That sounds like it would completely destroy the US economy and government budgets (at which point the only thing left to do is to establish a war economy under authoritarian rule and continue war? I don't even know, it sounds completely bananas...)
I don't want there to be a war with any of those countries, but if there's one thing we should all have learned by now, it's to take Trump at his word. When he says he wants to do a thing, he's not bluffing.
There are very few politicians that are actually deficit hawks. The majority that claims that position are actually entitlement hawks. That is, they use fear of the deficit to talk about the need to reign in social security, medicare, medicaid, food stamps, and any other form of government assistance regardless the size or impact on the government budget.
Meanwhile the DoD, CIA, FBI, NSA, DEA, DHS, and ICE have never had a politician seriously consider reducing their funding.
Gotta be honest, I think it's more likely that Trump just has a strange fixation on tariffs. I don't really think there was a whole lot of planning around them other than "I want them".
How he's deployed them and spoken/written about them makes me think he thinks it's a good way to strong arm countries and he wanted to strong arm everyone.
I think it's because it's one thing he can control all by himself. Look at all the attention he's receiving. The "will he/won't he" reality TV. Put a tweet saying X%. No, they won't be cancelled. Yes I'm suspending them for 90 days. And so on.
Except he can't. They're abusing a legal loophole that probably can be easily defeated in court if anyone interested can actually locate their balls to do it
I don't believe he can get a 7/2 ruling in SCOTUS. But I do believe he can get Republicans in the current Congress to jump for him, and to try to ensure their majority by disenfranchising people before the midterms.
I'm not saying he won't win the case but you're daft if you think it won't be 5-4 on the grounds that congress actually has to pass something to signal their intent to the courts.
The question here is not whether congress has to pass something, the question is can congress delegate this authority which is explicitly set by the constitution.
There were a bunch of sentences regarding non delegation of powers of congress, mainly for federal agencies, and courts deciding that congress can't delegate those faculties, so, by the book, this would be a similar situation. There is actually an ongoing case for this aspect of the discussion:
He definitely does, and has since at least the '80s.
That and his self-image as The Best Negotiator (while his actual "negotiating tactics" are really just mob-boss intimidation and bullying) are a huge part of what's going on here.
There's no actual commitment here. He could reverse again tonight. He signaled ongoing dissatisfaction with countries that had retaliated, so may well take further action there during the 90 days, which 90 days are, again, meaningless in that they don't bind him at all, and even if they did, he's done a bunch of things he's "not allowed to" and so far has gotten away with tons of it.
You're right. But as we see with TikTok, he loves to talk big but keep kicking thr can down the road instead of backing off. There will inevitably be more spats in the meantime (especially with the EU), but I wouldn't be surprised if he extends it more when July looms (assuming that congress bill is still struggling to pass).
Trump has had a bizarre fixation on trade deficits since the eighties. Back then he blamed Japan. Now it's China. It's his one and only ideological commitment.
Everyone’s a deficit hawk in the long term. It’s easy to talk tough on reducing dept at some non-specific time in the distant future probably after you leave office.
The tariffs that he kept on would be nothing to sneeze at in more… civilized times. The market overreacted, as was priced in the vix at 50+. We are not out of the woods yet.
125% tariff rate on your biggest importer isn't something I'd say is "nothing to sneeze at" personally. Particularly when the expert economist used to justify it is made up.
Yeah I was wary of saying 'declaration of war' (even though I think it's kinda true), but at least those imports will route themselves through Vietnam or wherever now in a few months.
The EU actually executed some strategy. First they said they would love 0/0 tariffs, which sounds fair to pretty much anyone. And when that didn't fly they put on selective reciprocal 25% tariffs. What Trump did looks even more like a clown show.
They floated 0/0 tariffs before the reciprocal tariffs (and again after), and their tariffs this morning was in retaliation for the steel and aluminum tariffs, not for the reciprocal tariffs.
I am normally all in favor of metonymy, it's perfectly fine and well understood style.
In the case of Trump-as-Mad-King tariffs, it sure would be nice if the world didn't conflate America, the historical land of twisting other nation's arms to reduce tariffs, with Trump and his fake-emergency tariffs.
I can understand if you do, and if America has permanently lost a lot of good will by electing this buffoon for you, I can hardly argue with you.
But still. In my mind, these are Trump's tariffs, not America's.
And specifically the idea that Trump's tariffs are reciprocal, that is even more "Trump is just a liar" than something any honest American would argue.
Even if you call it “Trumps Tarrifs” that means we have a better than even chance of having to deal with this.
If you’ve never elected a buffoon like this it’s easy to believe it’ll never happen. If you’ve done it not once, but twice, it’s really hard to believe it won’t happen again.
Maybe I should write "an American" instead. As in, I assume the person I am responding to is an American and is calling it reciprocal tariffs to propagate the idea that it was reciprocation.
It's a smart strategy designed to exert maximum pressure on someone who is publicly saying they want to annex some of your territory (Greenland), and generally acting in an irrational manner.
James Carville in the 90s: “I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”
so the uncertainty in the market drove investors to T-Bills, driving up their price and lowering their yield, effectively making servicing the national debt marginally cheaper. By 0.03%, which I imagine stacks up with trillions of dollars compounding.
This makes some sense... but they didn't pause the tariffs. There's still a 10% tariff on everybody (including on top of Mexico and Canada, who were previously exempted from the tariffs announced last week) and the tariff on China continues to rise to preposterous proportions.
Would it have been too inflationary/recessionary to impose these crazy tarrifs on 'rest of world' AND increase china to 125% at the same time so he simply had to sacrifice one to do the other?
Sounds like a sage take (where do I study economics?), but why do people doubt the meaning is as straightforward as the messaging: during campaigning trump said he would rectify the unfair tariffs, and in the lead-up and since election he has talked lovingly about tariffs, with the goal being (as almost everything trump) domestic fortification through jobs, industry, and generating revenue from those who have abused the US largesse to enrich themselves - and now balk at a just correction.
I think there is a backdrop/larger picture (probably nuanced and multifaceted levers against all other parties negotiating), but the main I think is to shake up the global economic landscape to make it easier to improve it. Reset.
I see a lot of complex takes on here that require quite a lot of sophisticated theories...and while I enjoy the complexity and the perspectives (and - wish I had studied economics to really grok them), I think it's really just as simple as they say. And what they say they're doing makes sense.
Maybe the truth is no one really knows what will happen, and so it's a bold move but we'll see. But I believe they're doing what they think is right for America to strengthen the country, just as they say - not some 3 degree removed chess strategy, just simple.
Genuinely wondering why so many people are still giving the Trump administration this much benefit of the doubt that their moves are strategically sound? We're really still doing the whole "3D chess" thing with this guy after he has shown over and over again that he mostly just acts on impulse and the primary qualification for his advisors is loyalty over any type of intelligence or expertise?
I dunno. Somebody literally wrote a guidebook for him to follow, but I haven't even glanced over it.
The stuff I've seen people quote from the book have all been stupid, but the kind of stupidity seems to be a "do X, so you'll get Y" where "Y" is really bad and the author thinks it's good. So I guess I do expect some kind of coherence from him.
That said, I don't remember anybody claiming Project 25 talks about tariffs.
I don't think that Trump himself is competent, but I'm not be so sure about the people around him. The effort it took to put him above the law was at least a decade in the making, so clearly someone knows what they're doing.
I don't think it's a coincidence, for instance, that Steve Banon's strategy of "flooding the zone" looks exactly as the type of chaos currently coming from the White House.
> Genuinely wondering why so many people are still giving the Trump administration this much benefit of the doubt that their moves are strategically sound?
Since I'm one of 'those people' who's been willing to grant Trump some benefit of the doubt in the past, I'll respond with my take. tl;dr Trump's handling of the tariffs have been such disaster, there's simply no possibility it was based on a strategically sound plan. So, in answer to your question, this episode has caused me to substantially foreclose my prior willingness to grant Trump some benefit of the doubt.
To be clear, while I've tried to remain open-minded re: Trump I've never felt that he's especially smart and certainly not someone I'd ever personally like or hang out with but I'm also one of those contrarians who doesn't think every politician or public figure needs to be someone I personally like or approve of in a moral sense. I've also been willing to concede that some things done by the executive branch during his first term were generally positive (whether because of or in spite of Trump isn't clear). I also think his policies and statements have been subject to an unprecedented degree of negative spin in the media - sometimes well-deserved but always hyped overwhelmingly to the negative. So I made an effort to look past the constant headlines of, essentially, "orange man bad in all possible ways." I also decided to ignore Trump's own bizarrely extreme pronouncements and focus only on what he really put into practice and, most importantly, the tangible real-world impact of those actions on the broad population and economy over time (not the extrapolated predictions in the media).
However, even to me, how he's handled this tariff thing has been a complete shit show. I've spent a fair bit of time trying to understand the various explanations, contextualizations and even 'hidden grand plan' theories proposed by some and they simply aren't plausible. It's not a 'master negotiator strategy' because he asked for concessions but never made any concrete proposals of quid pro quo. There was no attempt at serious negotiation with most major trading partners (according to the WSJ) and thus no possibility of meaningful deals.
Now suddenly (somewhat) reversing course like this a few days after going so extreme and then publicly doubling down on his long-term commitment to the 'grand strategy' is unbelievably damaging to any remaining shred of credibility his administration may have had. It nukes any possibility that he was doing a 'crazy guy on the subway' strategy of punching his adversaries in the face and making them believe he was so nuts he'd saw off his own arm just to keep beating them over the head with it - all to cleverly convince them to make meaningful concessions they'd never make any other way. Yeah, well now that he blinked in less than a week, nothing he can do will ever make them believe that. I mean, if that was the plan, it was a terrible plan and poorly executed to boot, but flipping like this is even worse.
All I can figure is that it was a 'crazy guy' plan but that he intended to keep it going for several months and then, when his opponents were bloodied enough he'd open negotiations and "win" in a master stroke. Except he completely miscalculated the degree of economic destruction he'd cause in U.S. markets and has now had to not only fold but reveal he was playing a weak bluff all along. I'm struggling to come up with any way this could have been worse for the U.S. and Trump's interests. After this, it's hard to imagine any trading partner negotiating in good faith, or perhaps, at all with Trump over tariffs in the next 90 days. The only rational strategy for them is to play along and gather info while conceding nothing meaningful and simply wait and see what Trump's ultimately going to do long term.
As far as I'm concerned, I bent over backward to grant Trump some benefit of the doubt and give him a chance to prove himself but the tariffs have been so bungled they're impossible to put it in any positive light. So far, it appears to be an epic disaster of hubris and naive miscalculation.
Is it possible that Trump is just a stupid person? That he genuinely believes the tariffs will be good, that he's being influenced by stupid people (Navarro) that believe this, and that the reaction of bond markets that didn't follow his overly simplistic model made him hit the brakes?
> the reaction of bond markets that didn't follow his overly simplistic model made him hit the brakes?
It's pretty clear that's essentially what happened. The question is how, why and what Trump's plan was.
> Is it possible that Trump is just a stupid person?
I don't think a simple linear scale between "Stupid" <---> "Smart" is a useful model for predicting likely job performance in complex, multi-function roles. Reality is far more complicated and nuanced. Whether assessing an employee, CEO, politician or spouse, just using an IQ test (or any other single point measure on one dimension) yields only an approximate directional indicator. It's certainly not the optimal model because it's entirely possible for an employee, CEO, politician or spouse who scores meaningfully lower on an intelligence test to substantially outperform a higher scorer in real-world results on the broad composite of job, leadership, governance or spousal metrics you care about.
I've read Trump's "Art of the Deal" book. He thinks he's a gifted negotiator based on the success he had in negotiating commercial real estate deals. However, commercial real estate deals are generally a pretty narrowly specific kind of deal structure. They tend to each be one-off, transactional arrangements which hinge on accurately estimating the value which can be extracted over time from a property and the future performance of the market in that location. Then forming a one-time consortium of financial backers willing to provide the capital on terms which will allow the operator to make a profit. While the amounts can be large and horizons long, these are fairly simple deals with only a few unknown dependent variables everyone is estimating the value of their position on. It's a bit like poker in some ways. It's a bid, counter-bid type of structure with only a few sellers and a few buyers at the table at any given time and each seller is offering something different enough that it's not a true commodity. There's hidden information but the domain is constrained and the unknowns are known. The bidding process reveals some information about how each player has assessed the value of their hand. They can either have a truly strong hand, be bluffing or somewhere in-between.
This is why I think Trump is ill-suited to directly managing complex, multi-dimensional geopolitical negotiations. They are profoundly different. There's far more hidden information, the domain is nearly unconstrained, there are unknown unknowns. However, not being good at negotiating these kinds of deals isn't necessarily a problem for a president. There have been a lot of presidents who've done well in geopolitical negotiations who were similarly ill-suited. They did well because they were good at selecting talent to manage those processes, setting high-level objectives and meta-managing those processes against broad political objectives and policies (Reagan would be an example). The fundamental problem with Trump is that he thinks he's good at all types of negotiation AND that it's important to his self-image to be perceived as directly involved and instrumental in 'winning'. The final nail, as it were, is that it's pretty clear Trump's default model in negotiations, politics, legal strategy, financial deals, etc tends to be "win/lose" vs at least starting out seeking a "win/win". Complicating this is that his projected self-image seeks to be publicly acknowledged as winning by beating his opponent.
This is a bad scenario because every counter-party in geopolitical trade negotiations has a far more detailed psych analysis than what I wrote that's been prepared by experts who've read everything Trump's ever said or written publicly. While Trump's actions in any given moment are certainly unpredictable, that's not generally a good thing. Especially because his internal priorities, self-image and emotional dynamics appear pretty easy to read and fairly predictable. Whether they're right or not, the counter-parties almost certainly believe they have a fairly solid take on Trump's psychological drivers. Appearing "scrutible" wouldn't necessarily be a bad thing (in fact it could be quite good), except that these psych evals are both high-confidence AND they say Trump is unpredictable, sometimes acts out emotionally, is swayed by personal loyalty over strategy, can perceive negative outcomes as personal attacks, reflexively seeks retribution for personal attacks, is strongly influenced by the immediate feedback of a couple dozen people and has few strongly-held philosophical or political premises. Whether all of these things are entirely true or not doesn't much matter. Trump has projected them so consistently over so many decades others believe they're true.
That's why when Trump said yesterday that he intends to personally be "deeply involved" in the negotiations with trading partners, I sighed. He has virtually no credibility as someone willing to stick by any framework that might be developed in private negotiations. He also has no patience for the long, painstaking process involved. No matter how good the Treasury and State negotiating teams are, their own boss has convinced the counter-parties that these teams have little real influence or ability to strike a deal. To me, that means the odds of any meaningful deals being negotiated where counter-parties are willing to 'horse trade' elements of significant value is between slim and none.
That's not it at all. I'm sure there's lots of sycophants out there, but a lot of people just don't find "he's stupid and it's random" a satisfying explanation for his actions, even if they disagree with them.
That's weird, cause they sure smeared millions of people real fast as undesirables trans/illegals/DEI/woke, but Trump gets a million chances and coup do-overs and please explain take your time sir: What is the amazing 4D strategy behind telling people to drink bleach?
Nepotism feels good all the way until it sinks your company.
A lot of this stuff is on a YouTube education level, not even a degree. I would be shocked if the US does not have a bunch of economic advisors who tell them what problems there are and what should be done. They've probably mapped out all the next steps. Most US presidents are Harvard-level smart, but the White House has been around long enough to find a way to deliver reports to the simpler ones.
There's a lot of obvious big problems - confidence in the USD, debt rising faster than GDP can catch up, military overextension, China's rise outpacing US, inequality, inaccessible education and health care, opioid crisis, etc.
Trump has a good eye for identifying this - that's why he won the election despite all his weaknesses. It's clear he knows some of this but doesn't understand it - his comments on a BRICS currency, for example. Yes, a "BRICS currency" would threaten Pax Americana but it's on literally nobody's mind.
I feel like, if anything, he's an overplanner. A smarter leader would think, these moves will have unplanned side effects. Trump makes a lot of roundabout moves like DOGE. These moves have a target, but he hasn't thought about the side effects. And when a crisis like COVID hits, it disrupts the complex plans, which is why he reacts so poorly to them.
<< I would be shocked if the US does not have a bunch of economic advisors who tell them
Oh, US does have its share of economic advisors[1] of all stripes. And, I would love to be corrected on this, when SHTF, they immediately argue for NOT the very thing they normally argue for. They can tell what should be done for sure.. just not when it comes to their money..
(edit)Therein lies the issue or at least a part of the it.
Trump is famous for ad libbing and making up whatever he wants in the moment. His first administration was not prepared to govern. I'm not sure how this is seen as over planning.
This just reads like pure fantasy to me. Have you not seen the account from numerous former Cabinet and White House officials about how lazy and incurious he is or how difficult it is to get him to read the reports put in front of him? Have you missed the way he has forced countless career officials out of the government through layoffs, firings, or pushing people to resign in protest? I don’t even know what to say to the idea that Trump is an “overplanner”, you even literally said “he hasn't thought about the side effects” a few sentences later. That’s “overplanning”?
I don't know how that is supposed to work or counts as an "overplanner". That sounds to me more like someone who has goals but doesn't actually have a plan on how to reach that goal.
that assumes a massive amount of economic understanding and intelligence on the part of the President that has simply been completely unobserved for his entire career.
occam's razor provides much better explanations here. He's an idiot obsessed with dominance games and thinks a tariff on a country means that country pays a tax to the US. He thinks trade deficits are bad, just like if I buy a toaster from Target, now I have a "trade deficit" with Target and I need to find something they'll buy from me.
He's a total dangerous moron and these attempts to come up with 11-dimensional chess rationalizations are misguided.
You want to do tariffs for national security reasons? Okay. I get it. Now get congress to pass a bill levying the tariff, have that bill be smart, encourage not just on-shoring, but also near-shoring (Mexico, Canada) of key manufacturing and minerals, apply the tariffs more strongly against the key geopolitical rivals (China), implemented in a graded, predictable manner. Do not piss of every ally in the world, in general pursuing this hierarchy U.S. > Mexico, Canada > European, African, and Pacific Allies > China, Russia. Finally, for key , and highly specific strategic industries, provide subsidies.
I'd believe you if he hadn't already flipflopped on tariffs recently. I think it's much simpler than that: he's pulling whatever levers he has to squeeze everyone and then letting up the pressure on people who do what he wants. He already did this with Canada and Mexico, using tariffs to get them to make a show of border secy=urity.
> Instead of being seen as a safe haven, U.S. debt itself started to look shaky.
Owning US debt is also simply less relevant to countries that are going to be trading less with the US. Countries which are ratcheting up tariffs with the US, for example.
im not an economist, I have no valid opinion on if this is right or not.
BUT, I actually started looking at moving more of the stable bond/treasury holding bit of my portfolio to foreign funds recently (in addition to moving more of the stock/mutual fund balance to international stuff).
If I'm thinking about that as an individual private citizen of the US, I can't imagine what actual professionals are thinking about.
Most foreign mutual funds and ETFs are classified as Passive Foreign Investment Companies (PFICs). PFIC investments face complex and often punitive tax treatment. Gains may be taxed at the highest marginal ordinary income tax rate (not the lower capital gains rate). Additional interest charges may apply. Annual filing requirements via Form 8621 for each PFIC
They likely mean US-domiciled ETFs which hold foreign shares. The big providers (BlackRock, Vanguard and friends) typically have copies of their big funds domiciled in, at least, the US and Ireland (or sometimes Luxembourg); the European versions are UCITS-compliant, and often offered in an accumulating variant (not tax efficient in the US, but it is in some European counties), but otherwise basically the same thing.
This again sees more logic in this than there exists.
America doesn’t have ANY issue refinancing that debt. US treasury is the risk free rate. It’s the basis of an infinite number of financial models as the baseline level of risk people will tolerate. Every single analyst from here to China works on that basis.
This idea that you can’t refinance debt is nonsense. American firms are wildly profitable, and America used to be the safest bet to set up a new firm, or do ground breaking research.
If you wanted to make more money, increase taxes, and you can refinance debt even faster than this. Shifting the yields is … how does that apply to new bonds which would be auctioned??? The face value and rate are set anyway.
I don’t think this checks out. They didn’t walk any tariffs back until after the auction saw strong demand. It went opposite the way one would think setting the fall in bond prices the previous night.
I think this would be expected though, no? Sure, there's flight to safety, but you're also reducing exports to the US, reducing the number of dollars flowing to foreign nationals, which reduces the demand for treasury bills, which an excess of dollars would often be used to buy to have an inflation-"proof" store for your dollars without currency risk. You would also expect devaluation of the dollar from tariffs / trade-war, which I would also expect to cause selling of t-bills in favor of local currencies
Trump's obsession with tariffs dates back to 1988 when he lost an auction for the piano from the movie Casablanca to a Japanese buyer. Afterwards, he started complaining about how all these other countries are ripping America off, and here we are.
"From the beginning, I’ve believed the executive branch's real goal was to push down the yield on the 10-year Treasury. Why?"
None of leaked conversations or prior discussions indicate anything like this. Peter Navarro has no even slightly nuanced agenda. He's been on record for years about this. I think their position was much more that they'd drive foreign tariffs down and would be able to make other demands against other countries, and they underestimated the tolerance even their base would have.
I find the most consistent explanation for Donald Trump is he does whatever is going to keep himself the top news story in the media. I don't think there's any deeply held belief other than if he doesn't think people are talking about him that's bad
In his interview yesterday he mentioned that he won his weekend golf tournament. Of course he did, otherwise it wouldn’t be newsworthy (still isn’t, but oh well).
Then he asked the reporter if she saw that he won. I think he asked twice.
I look at that simple interaction as the most accurate model of his behavior. Are people talking about me? Good. Why aren’t people talking about me? I need to do something to make sure they do. He may very well have actual intelligence but it doesn’t seem obvious that it is the catalyst of anything he does.
>From the beginning, I’ve believed the executive branch's real goal was to push down the yield on the 10-year Treasury
You're making it seem that there's a plan ... but what if this is just regular incompetence coupled with capricious behavior from a chaos agent?
I'm watching various officials give interviews and all of them are non-committal as it pertains to expectations. Why? Because none of them actually know!!! Trump has arbitrarily and capriciously changed "the plan" many times.
The political cohort behind the president is roughly in two halves. The first half are the original MAGA crowd (looking out for the working class, pro-liberty, anti-woke, etc.). The second half are the billionaire crowd.
The second group are active on pod casts, on Twitter/X, and are partly represented in government (directly or as advisors). An easy way to follow up on these people is to watch the All In Podcast or their related social media connections.
What these folks have said for a long time is that if USA stay on the same path, the USA goes broke after 10 years. So if you have long term investment in the USA, you lose your fortune in 10+ years.
This is the key motivation for their involvement in the current executive branch of government. This is why the DOGE program is so well supported by them.
If you lose the battle to reduce the 10-year Treasury yield, you lose the billionaires because they stand to make meaningful losses on a 10 year horizon.
I recognize the plight of the common citizen here; they are the plurality. But the big political levers come from these billionaires (absent a grass roots supported leader in the wings).
If the goal to drive the yield on T-notes down, then cut spending and raise taxes. Get the budget into something like balance and the Fed will cut rates, and borrowing costs will fall. You don't need some 3D chess with a manufactured financial crisis.
When your rational explanation involves people shooting themselves in the head to cure a headache, something's off. There's nothing to explain here besides a weak and incompetent leader with a deep need for attention, surrounded by lots of enablers.
I think only thing likely to make US go broke is Trump's actions.
DOGE doesn't save any money. Not only because it's created many legal messes that will take forever to work out in court but because most of those jobs are important and will eventually need to be replaced at great cost and with worse results. Also some of those jobs are for auditing inefficiency and prosecuting corruption resulting in more money spent. And on top of it all they'll be using these non existent savings to justify much larger tax cuts for the rich.
The reason it looks stupid is because it is. It's not that Trump is purely dumb he's just intellectually lazy and doesn't care about policy. He long ago decided he likes tarrifs on instinct so he put massive tarrifs despite the warnings that they would be disastrous
This belief seems to disregard the fact that the billionaire crowd hates markets being spooked far more than it cares about 10 year Treasury yields (which in any case went up precisely because markets were spooked; if you wanted to do something about reducing long term bond yields, committing to just about any other economic policy would be more credible). Even some of the most sycophantic billionaires were evidently furious about the tariff policy.
Also, Trump has been obsessed with the idea of tariffs since the 1980s.
My listening to such billionaires explains a different attitude.
Small investors, and medium investors hate market turbulence for sure.
But when you are a billionaire, you can easily profit from short term uncertainty. For example, Chamath recently disclosed a (potentially large) Credit Default Swap position (meaning he makes huge upside if USA debt position deteriorates). But he was the same person deeply concerned about USA long term debt. He is a well connected person to the executive branch.
The reason is that if you are a billionaire (tied to the USA financial system) then you can't escape the system when the entire system falls due to (God forbid) a collapse of the USA financial system in 10 years time. It is like they are the dinosaurs worried about a Meteor strike, but not worried about tigers and snakes (that can't hurt them).
If the billionaires were genuinely concerned about a complete collapse of the USA financial system in 10 years, they wouldn't have bet on a president with a track record of expanding debt to pump the stock market in the first place, and it would be hard to imagine anything less likely to stave off a crash than launching a trade war or threatening to annex your neighburs. Frankly the only only credible cause of the US economy completely collapsing within a decade is called Donald.
Getting a short term interest rate cut makes very little difference to the robustness of the US economy in a decade's time, and even if it did, there are many ways of getting a short term interest rate cut that don't involve massive economic disruption and permanently sabotaging US trading relationships (most obviously, the president nominates the chair of the Fed...). You could see what the likes of Ackman and Elon actually thought about the tariffs from them breaking ranks to moan about them.
The billionaires who backed Trump like standard right wing stuff like tax cuts, deregulation and/or racism, or figured he was going to win anyway so they might as well get credit for being seen as his ally. Some of them might actually be well informed enough to place shorts (and hey, the ones who own trading shops rather than manufacturing and services companies might be able to win more than they lose in equity value that way) but that's a completely separate issue from the idea that chaos now could have positive effects in a decade's time, which only one billionaire in the world is dumb enough to believe...
The bond market is always the adult in the room. The UK PM lasted like 44 days when the bond market pushed her out [1]. In this case, the flip was that all the chaos led to people leaving behind the USD completely. Trumps view of the US/World is ~30+ years out of date. There are other stable places to put money now where it used to only be USD.
Isn't iceberg lettuce so common in part because it's one of the most stable lettuces? Still absolutely hilarious that Truss was outlasted by a head of lettuce, but I want to make sure that we're being accurate.
Iceberg lettuce is a cultivar known for its longer shelf life and higher water content.
Romaine lettuce is another lettuce cultivar famous for its crunchy texture and higher vitamin content.
I am switching to Romaine for the vitamins now I know (have read a single headline on the internet) better.
China dumped 500B in treasuries and the basis trade blew up is what happened
Tariff deals were still going to happen regardless. The pause is a stop gap for the basis trade (20+x levered), of which an uncontrolled unwinding threatens the entire financial system. Fed already had a bailout facility ready as a plan B. Too big to fail and all that
Calling the Fed bankrupt isn't a close to accurate description of what was described in the column. The post describes a unhealthy balance sheet, but the Fed can't go "bankrupt" in the common sense, as it banks itself, with the assets held on it's ledgers purchased and backed by the hypothetically infinite monetary supply. All that was described in the column wasn't bankruptcy as they put it, but how the Fed organizes assets by their quality.
It's scary to think he's just not got a clue and doing whatever he thinks of in the moment isn't it?
I mean the guy who doesn't understand tariffs, at all, but has publicly loved tariffs for 40 years in charge of tariff policy. That's disturbing to contemplate head on.
Much better to invent some comforting fantasy of secret plots being carried out semi-competently to achieve nebulous but vaguely noble goals.
The refinance is a real issue, but it doesn't matter too much cause the Fed can (and will) always intervene. They can soak up any supply to push the 10 year down.
Same reason why it doesn't matter if China etc.. wants our treasuries. Fed is always there to buy them.
I'm not an economist but I believe this is only the case so long as USD is the global reserve currency. If that ceases to be the case, the Fed has a lot less power to print money and inflate debt away. I believe this is the case Ray Dalio has been making for some time now:
Uncertainty is a massive problem and may itself bring on a recession more than any tariffs. It's a huge factor in the oil market crash that's currently going on. I've seen one oil expert say that Obama was the best president for the oil industry because he did... nothing. There were no kneejerk policy changes on a weekly basis. And anything requiring large capital investments thrives on certainty.
As for Treasury yields spiking, that was no accident. As part of China's (justified) retaliation to the tariffs, they started selling off 10 year Treasuries intentaionlly to spike the rates because that's one thing the Trump administration seemed to care about.
I still don't know what the endgame is/was here. Some seem to think devaluing the dollar was the goal to boost exports but also to effectively devalue US soverieng debt. There's precedent for this eg FDR's sovereign devaluation of the dollar and Reagan's Plaza Accord.
This makes a lot of sense, although I wouldn't give them the credit of being so coherent in their understanding/targeting of what they were doing.
In my opinion the reason it backfired, what they proposed wouldn't merely cause a confidence in crisis, but also implied a fundamental shift in the market and the way it worked, this would also have to be priced in, hence the drop. There was no longer necessarily a "buy the dip, the market will go up at some point".
The T-bill strategy wasn't a secret. Why they walked it back could also be attributed to bringing trade partners to heel at a point of maximum leverage. Or a lack of resolve in leadership. Or messaging and opportunism.
Will it pay off? Who knows. If it does, it will go down as one of the greatest gambits in modern history. If not, perhaps the end of dollar hegemony? End of the Global American Empire? Or nothing at all?
It’s time to stop bending over backwards pretending that Trump’s tariff threats are part of a coherent economic strategy. They’re not.
When you drop the economic lens and view tariffs as a political tool for consolidating power, everything suddenly makes sense.
Here’s how it works:
- Tariffs hurt corporations. They jack up costs, raise costs. Executives know this. The markets know this.
- But there’s a loophole: carve-outs. Trump has the power to exempt individual companies or industries from these tariffs. That means if you’re a CEO and your business is on the line, your only option is to go to Trump and ask for mercy.
- That’s not policy. It’s leverage. It creates a system where corporate leaders must show loyalty to get relief. Not because it’s good for the economy, but because it’s good for Trump. Maybe it's public support for his initiatives, attacks on his enemies. Whatever it is, it gives him political power.
This mirrors the playbook used by authoritarian leaders throughout history. Look at Putin. His use of tariffs wasn’t about growing Russia’s economy—it was about punishing enemies, rewarding loyalty, and projecting control. Tariffs became a way to rewire power dynamics.
Also, this trade war pushes the USA close to a war with China over Taiwan and maybe Panama Canal, which is exactly what you want as an authoritarian to stay on longer. Find an enemy and use emergency powers to maintain control.
The only aggregate alternative to holding T-bills is to hold dollar bank accounts. At which point the bank holds the T-bills instead or the Fed does as balancing assets to the account liability.
It could all be refinanced to three month bills without any issue at all.
Ultimately balance sheets have to balance. In a floating exchange rate system there is no aggregate out.
You are correct on the mechanism here. But my point is adjacent to that. Whilst you always get a buyer for the debt (here the bank), it is the yield that matters as the re-financing cost cannot be escaped irrespective of the owner.
Or maybe investors didn't buy treasuries because they were in on the scam all along. They wanted to stay liquid because the plan was always to crash the markets and spook foreign investors while US investors are informed to wait for the tweet about the 90 day delay and buy cheap stocks.
> Because when your national budget depends on cheap debt, you can't afford a crisis of confidence in your bonds.
True. The odd thing is that the previous tariffs announcements on supposed allies, plus all the other sabre-rattling that Trump has been doing, NATO-bashing, flipping on Ukraine, etc., had already triggered a crisis of confidence. So what did they expect? That unexpectedly unleashing of wildly unreasonable and poorly-calculated tariffs would inspire _more_ confidence? If getting investors to flock to T-bills was the goal, it was always bound to fail. (It only worked in the short term because T-bills are the default in a time of market uncertainty; but when it became clear that the uncertainty was caused not by the market, but by the government's behavior, well then T-bills don't look so good anymore).
I realise I'm asking for an imagined scenario but- who would this adult be, that somehow escaped the purge of competence and oversight in favour of sycophants, and how would they broach the topic with Trump (who of course wants to be the Big Boy and loves supplication)?
I am extremely skeptical that a president and a party that massively increase the national debt every time they hold unified control, and whose single legislative goal this year is to do exactly that once again, is engaging in a sophisticated conspiracy to lower interest payments. If Trump and the GOP actually cared about the debt payments they wouldn't be arguing about how many trillions of dollars to add to it this year.
The much more likely scenario is that this is exactly what it looks like: an incompetent and corrupt president flailing around. Tariffs are an excellent tool for soliciting bribes since there are any number of ways various groups can be exempted, and this type of abuse has often happened historically. The ham-fisted way they have been implemented has done a great job of getting Trump attention. I've never seen anything to make me think that Trump cares more about the long term health of the country over getting bribes and attention for himself.
>Instead of being seen as a safe haven, U.S. debt itself started to look shaky. Maybe it was the deficit outlook, maybe the global response to tariffs — but whatever it was, yields started climbing. Fast.
Seems pretty simple to me - bond yields moved up sharply because they follow inflation expectations. Bond holders take on inflation risk, so when future inflation is expected to increase, yields go up to compensate. Out of control tariffs equals out of control inflation, which equals rocketing bond yields. The fact that Trump's team didn't realize this would happen is both hilarious and frightening. This is Econ 101 stuff.
Just four hours before the U.S. administration announcement, posts here were already calling the surge in U.S. bond yields a "non-event." ( and being flagged..)
It was indeed about T-bills. Something Trump probably doesn't even know what it is. There’s no strategy, no objective, just sheer, unfiltered incompetence.
The stock market’s reprieve will be short-lived. In just eight days, this administration erased $5 trillion in market value, insulted its primary trading partner using language deeply offensive in Asian cultures, and made it clear to investors that it has zero credibility.
Futures are already negative, which is exactly what you'd expect. The market is responding. And let’s be honest: the claim about 75 countries eager to negotiate is a pure lie. The EU has publicly stated the U.S. administration was not even returning their calls.
Correct. It seems to me the increased bond yields payments will significantly exceed revenue raised from tariffs. This is imho a bad long-term signal. I very much doubt the markets will just return to normal after the extreme volatility of the last few days - the huge tariffs on China will cause a lot of economic pain within weeks, and the administration's bellicosity toward Canada and NATO do not project stability and rational decision-making.
Besides the financial uncertainty, I doubt businesses want to make huge capital investments within the US to re/build factories in such a febrile environment. Will they be 'encouraged' to make 'donations' or purchase Trump golf club memberships? Will their foreign management staff be abruptly deported if someone in the administration sours on their country of origin? Will they wake up one day to find they've been denounced by conservative influencers?
Yeah... if that was their reasoning then they are as dumb as a sack of rocks. The rates went up further after the tariffs pause today.
> Instead of being seen as a safe haven, U.S. debt itself started to look shaky.
No shit. Having an inconsistent policy because of clear incompetence (xx Dimensional chess) is a very bad sign for the world largest economy. At some point this will hit the bonds which is the foundation of this economy.
Bessent said the decision had nothing to do with the markets.
“This was driven by the president’s strategy,” he told reporters outside the West Wing. “He and I had a long talk on Sunday, and this was his strategy all along."
Trump later contradicted Bessent.
“I was watching the bond market," he said. “That bond market is very tricky.”
This sounds sensible but that's not what happened. The government debt is not an issue. Trump is more concerned about the stock market, and the market sent him a clear message.
I honestly don't think this was their overall goal (it doesn't logically make sense, given tax receipts dip during recessions and governments often take on even more debt,) but I do think that is why they blinked.
> But then something flipped.
> Instead of being seen as a safe haven, U.S. debt itself started to look shaky. Maybe it was the deficit outlook, maybe the global response to tariffs — but whatever it was, yields started climbing. Fast.
So, it's not this unstable president, his insult-spewing vice-president and his buddy the hyperactive billionaire manipulating a social network for Russia and China that makes the rest world want to avoid the USA for the next few years?
These complex 4D chess strategies never really pan out. Maybe someone in the administration thinks that was the goal but not Trump.
During the campaign Trump said he wanted 10 percent tariffs on the world and 60 percent tariffs on China. After all the noise we are now at… 10 percent tariffs with the world and 125 percent tariffs on China (pending negotiation with China).
"Alarm inside the Treasury Department over signs of distress in the US government bond market played a key role President Donald Trump’s decision to hit pause on his “reciprocal” tariff regime, according to three people familiar with the matter.
Treasury Secretary Scott Bessent raised those concerns directly to Trump in their meeting that preceded the announcement, underscoring the concerns shared by White House economic officials who had briefed the president on the accelerating selloff in the US Treasury market earlier in the day.
The market turmoil has rattled administration officials and market participants because it’s the exact opposite of what historically occurs in moments of global economic crisis or volatility. US Treasuries are considered the safest corner of the market. It’s the place investors across the globe flee toward with the assurance that the dominant US role in the global financial system will ensure asset safety.
But at the same moment Trump’s tariffs were causing foreign leaders to question the durability of longstanding US security and economic alliances, the rapid selloff of safe-haven assets raised concern that financial markets have similar concerns.
Trump acknowledged he’d been watching the bond market, telling reporters after the announcement the market is “very tricky.”
A spike in yields in the 10-year benchmark was of particular concern for Treasury officials. When the yields rise, US consumers face higher costs on things like mortgage rates for homes and financing costs for businesses."
The yield really isn't that big a deal. It's hundreds of billions of dollars over decades if it moves by 1 percent. Compare that to tax cuts leading to trillion dollar annual deficits.
I mean, it could well be that they are risking the stability of the US economy to save money on refinancing the debt, but that would be a stupid thing to be doing.
Trump formulated his ideas on tariffs in the 1980s. He talked about them with Oprah in another ero. He didn't do this in preparation for some realization of the bond situation in 2025.
All those long 8 weeks that people spent complaining about soft power, and the US government spent trying to gaslight people saying that they don't even use the power... The people complaining were talking about something real.
I disagree. Trump has been threatening tariffs since 2016. Each step he gets closer to significant tariffs. This time he stepped back after they seemed real.
Now businesses know he really, super means it this time, so they get another reprieve. But next time it would be hard to claim Trump didn’t warn them.
I agree it's classic brinksmanship and the tariff views he has are genuine and long held. But his numerous signals to the Fed to ask to lower interest rates and the commitment to DOGE (which has the effect of lowering yields) is another strand in his thinking. The two are in conflict causing the flip-flop effect in short term policy.
I think you’re projecting more advanced thinking here than you can give them credit for. The administration doesn’t have military guys keeping discipline.
You have Trump who has an instinctive affinity for tariffs, and a wack pack of various characters doing whatever. I’d guess they thought the Chinese would roll over rather that start dumping bonds.
If your goal is 'lower the rate at which you'll refinance a bit of debt by a quarter of a percentage point', blowing up your export economy, import and tourism industry, and introducing a national 40% sales tax seems like a really weird way to achieve it.
Given that all of those things would torpedo your ability to actually service debt, both new and old.
That’s my read on why the U.S. just paused the global tariff hike to 10%.
From the beginning, I’ve believed the executive branch's real goal was to push down the yield on the 10-year Treasury. Why? Because Uncle Sam has to refinance a mountain of debt this year, and the cost of that depends heavily on Treasury yields — especially the 10-year. That’s the rate that sets the tone for everything from mortgages to corporate borrowing.
So they tried to spook markets. Introduce global tariffs. Stir up uncertainty. And it worked—at first. Yields dipped. Traders moved to Treasuries as a typical flight-to-safety.
But then something flipped.
Instead of being seen as a safe haven, U.S. debt itself started to look shaky. Maybe it was the deficit outlook, maybe the global response to tariffs — but whatever it was, yields started climbing. Fast.
At that point, the strategy backfired. The executive branch had no choice but to walk it back. So they paused the tariffs.
Because when your national budget depends on cheap debt, you can't afford a crisis of confidence in your bonds.