Trump’s tariff raises the sale of US government debts

Confidence in the American economy has declined, as investors threw government debts amid increasing concerns about the impact of Donald Trump’s tariff.

The government sells bonds – mainly IOU – to raise funds from financial markets and is seen as a safe investment.

The United States usually does not need high prices to attract buyers, but on Wednesday the interest rate on bonds increased sharply to touch the highest level since February by 4.5 %.

Trump has advanced in an experimental tariff for the goods that are imported to the United States, while Washington’s trade war has escalated with Beijing.

After the United States implemented a 104 % tariff on products from China at midnight on Wednesday, Beijing returned by 84 % on American products.

The stock markets have decreased sharply over the past few days as a reaction to the pressure on Trump forward with the customs tariff.

However, selling bonds is a major problem for the world’s largest economy.

The interest rate for us has increased over more than 10 years sharply in the past two days, up from 3.9 %.

While the interest rate on the debts of the US government increased, the price of the bonds itself decreased with poor demand due to the emptying of the investors.

“The high revenue of bonds means high costs of companies to borrow, and of course governments as well,” said Laith Khalaf, head of investment analysis in AJ Bell.

“The bonds must work well in times of turmoil, as investors flee to safety, but Trump’s trade war is now undermining the American debt market,” he added.

Some analysts suggested that the Central Bank of America – the US Federal Reserve – would have to intervene if the turmoil continues, in a move that reminds us of the Emergency procedures of England in 2022 after the Liz Trex mini budget.

“We do not see any other option for the federal reserve but to enter the emergency purchases of the US Treasury to stabilize the bond market,” said George Saravilus, the international head of FX research at Deutsche Bank.

“We are entering an unknown area,” he said, adding that it is “very difficult” to predict how the markets interact in the coming days, as the bond market suggested that investors “lost US assets.”

Simon French, the chief economist of Panmure Liberum and BBC that the Fed Reserve Bank could decide to reduce interest rates in an attempt to protect American jobs by facilitating companies to borrow money because they face higher costs of tariffs.

He said he was “tossing a coin” about whether the United States would enter the recession.

This is defined as a long and wide decrease in economic activity, which is usually characterized by a jump in unemployment and a decrease in entry.

JP Morgan, the banking giant for investment, has caused the possibility of an American recession from 40 % to 60 % and warned that American policy was “inclined to grow.”

On Wednesday, the Bank of England warned that the US definitions “contributed to increasing materials in risks to global growth” and financial stability.

“The uncertainty intensified,” he said, adding that the decrease in global cooperation between the two countries is an “additional danger.”

The bank said this is “closely closely” related to the United Kingdom because of its association with other economies.

Investors are now betting on the bank to reduce interest rates by up to four times, to support the economy against potential economic contraction.

The introduction of Trump threatens the definitions, which are imposed on goods imported from external countries, by raising many global supply chains.

US -based companies that bring foreign goods to the country pay the tax to the government.

Companies may choose to transfer some or each cost of definitions to customers, which may increase inflation.

Trump’s plan aims to protect American companies from foreign competition and also to enhance local manufacturing.

US Treasury Secretary Scott Beesen claimed that Trump’s goal is to “return jobs and manufacture to the United States, raise wages, increase revenues and revive the American dream.”

He said that the Trump administration was looking to “correct the mistakes of the long global commercial imbalances.”

Questions remain above the scale and the type of investors who receive American bonds.

There were speculations of some foreign countries, such as China, which has about $ 759 billion in American bonds, which might sell them.

Mr. Saravilus said: “There is now no small space to escalate on the commercial front.

But he warned: “There can be no winner in such a war. The loser will be the global economy.”