[magicloop]

"It’s the T-bills wot dun it."

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.

[milesvp]

> 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.

[creer]

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.

[insane_dreamer]

> We have long known that government debt is proportional to trade deficits.

And so far we've been cool with that because it:

- continues to make the USD the dominant global reserve currency, strengthening our economic and political clout

- allows us to borrow cheaply to finance our military and whatever else we're spending $ on

[lawlessone]

isn't this also kinda opposed to having the dollar as the dominant world currency?

Lots of countries settle trades between each other using dollars.

Making it harder to get those dollars will leave them seeking to use something else to trade.

[intended]

You are exporting services. Vast amounts of highly profitable services.

[ajross]

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.

[JumpCrisscross]

> 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.

[skybrian]

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.

[PaulDavisThe1st]

> 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. ]

[ToucanLoucan]

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.

[kamaal]

>>You cannot import something without exporting something else. That something else, in almost 100% of the situations, is dollars.

If you want the world to trade using your currency. You have to give them dollars. That is buy something from them. That is, imports.

All of this comes a section of US politics not being able to understand why the dollar standard even exists.

[rayiner]

Boomers really fucked on the economy to Sunday didn’t they?

[hayst4ck]

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.

[woooooo]

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.

[ajross]

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.

[spacemadness]

People are so desperate for this to be rational. Which itself is entirely irrational given the information at hand.

[casey2]

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.

[boringg]

Correction. Mao is Mao like. And you could call Trump a Mao like person, not the other way around.

[magicreadu]

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.

[sfblah]

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.

[thfuran]

That doesn't pass muster. If they had much interest in balancing the books, they wouldn't be ripping huge holes in revenue collection.

[alabastervlog]

These "here's the actual reason they're doing this!" things rarely hold up under any amount of scrutiny.

Then again, they're tempting because the things they're doing are also really bad ways to accomplish Trump's stated goals.

[dan_quixote]

Agreed - that's a huge indicator that they don't care about fixing the deficit. But they also don't want to be seen making it vastly worse.

[marcosdumay]

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.

[overfeed]

> If they had much interest in balancing the books, they wouldn't be ripping huge holes in revenue collection

That can be explained by the fact that the cabal also doesn't like paying taxes.

[motorest]

> 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.

[throwaway48476]

If they wanted to balance the books they'd print money and distribute it to US citizens.

[magicloop]

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.

[csomar]

If your rate is 0% fixed (just a hypothetical), you can roll-over your bonds indefinitely for free. This means, in practical terms, your debt is 0.

[gsanderson]

Donald is weak. He was always going to fold. Once China and the EU called his bluff and retaliated, he was done. Lasted less than 24 hours.

[matt-p]

Sir, the tariff on china has just increased to 125%.

I don't know why he held off on the other countries, but choose to go to "war" with China.

[baq]

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.

[kalleboo]

He didn't even know that the EU had put in tariffs until a journalist asked him at the press conference after he announced the pause.

[matwood]

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.

[jpmattia]

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.”

[magicloop]

I agree. The bond markets are the ultimate heavy hitter. They have government level impact. See also: The French Revolution.

[rcarr]

The name's Bond, Market Bond.

[digianarchist]

The T-Bill auction today went off without issue and that was before this announcement.

https://www.barrons.com/articles/treasury-bond-auction-today...

[sethammons]

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.

[JumpCrisscross]

> T-Bill auction today went off without issue and that was before this announcement

We're nowhere near the primary auctions failing. That would literally require a full financial crisis.

[magicloop]

That's a great data point. Thanks!

[UncleMeat]

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.

[greatpatton]

exactly and I think it's shocking that everyone is just repeating lies without putting them in context.

[matt-p]

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?

[keepamovin]

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.

[slg]

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?

[gsanderson]

Baffles me too. His ignorance is astonishing.

[marcosdumay]

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.

[probably_wrong]

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.

[mrandish]

> 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.

[muzani]

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.

[zzzeek]

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.

[SubiculumCode]

Being boring is profitable.

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.

[johnnyanmac]

>Because when your national budget depends on cheap debt, you can't afford a crisis of confidence in your bonds.

Well the US is still having a dick measuring contest with its largest importer, so no worries. We'll still get plenty of crisis from that alone.

[reverendsteveii]

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.

[justin66]

> 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.

[mizzao]

What about the insider trading that this facilitated? A few parties made HUGE profits with last-minute option trades today.

[Andaith]

This makes too much sense to be the real reason, if you ask me.

I think it’s being reversed because it cratered global oil prices and that would be a terrible horrible very bad thing _for Russia_.

[jdc0589]

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.

[greenavocado]

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

[intended]

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.

[derangedHorse]

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.

[mfitton]

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

[seo-speedwagon]

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.

[fhub]

One Source: https://www.wita.org/trade-news/trumps-love-for-tariffs-bega...

[lysace]

sigh

[kenjackson]

"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.

[mcshicks]

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

[grvdrm]

I start with this explanation too.

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.

[macspoofing]

>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.

[magicloop]

I'd like to expand out why I hold this belief.

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).

[matwood]

> But then something flipped.

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.

[1] https://www.cnbc.com/2022/10/20/uk-prime-minister-liz-truss-...

[sschueller]

The cabbage outlasted her...

https://x.com/jaayjayAT/status/1908793907976040839?t=aP60h4w...

[hammock]

>something flipped.

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

[greenavocado]

It's okay, the Fed has been insolvent at least two years now https://thehill.com/opinion/finance/3955889-the-fed-is-bankr...

[ZeroGravitas]

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.

[throwaway20174]

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.

[rcarr]

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:

https://www.youtube.com/watch?v=xguam0TKMw8

[jmyeet]

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.

[KoolKat23]

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".

[eigart]

It remains to be seen to what extent this restores confidence.

[ctrlp]

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?

[solfox]

No. This isn't an economic policy.

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.

[MVissers]

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.

[Ar-Curunir]

You are assigning too much rationality to this group of people. The cruelty is the point, not some hare-brained scheme to push down yield or whatever.

[AnimalMuppet]

I'm not saying you're wrong. But 10-year yields are up for the day, so if he was trying to calm the bond markets, it didn't work.

[neilwilson]

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.

[magicloop]

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.

[wk_end]

Trump has been on Team Tariff for 40 years. “There is no 3D chess, he’s just eating the pieces.”

[mixologist]

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.

[throwaway2037]

    > you can't afford a crisis of confidence in your bonds

In the last 75 years (post WW2), has there every been a crisis of confidence for US gov't debt? I cannot think of any instances.

[addicted]

Yeah but the damage is done.

A safe haven isn’t much of a safe haven if that’s where the fire has started.

[watwut]

Trump floating the idea of defaulting on debt on purpose certainly did not helped.

Generally the president acting like an insane maniac about to become dictatoe makes bonds look less trustworthy.

[insane_dreamer]

> 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).

[cjohnson318]

> Maybe it was the deficit outlook, maybe the global response to tariffs

Maybe it was the idea of 4 more years of shenanigans like this that freaked everyone out.

[jddj]

Yeah, the bond market started saying firmly "stop fucking around" and an adult seemingly appeared in the room

[pixelpoet]

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)?

[buss_jan]

Interesting theory. China might have seen through this ploy and that's why they dumped treasuries.

[rurp]

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.

[louthy]

> Maybe it was the deficit outlook, maybe the global response to tariffs

Or, maybe, and hear me out on this, maybe it was Donald Trump literally saying he might default on US debt.

Maybe.

[IAmGraydon]

>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.

[belter]

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..)

https://news.ycombinator.com/item?id=43630672

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.

[belter]

"Trump economic advisor says bond market added ‘a little more urgency’ to tariff decision" - https://www.cnbc.com/2025/04/10/china-trump-tariffs-live-upd...

[anigbrowl]

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?

[csomar]

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.

[tim333]

That seems to be confirmed by el presidente:

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.”

(https://www.yahoo.com/news/week-trump-pushed-global-economy-...)

[straydusk]

The idea that Trump had a goal as sophisticated as that is just hilarious.

[mempko]

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.

[throw0101d]

> From the beginning, I’ve believed the executive branch's real goal was to push down the yield on the 10-year Treasury.

The "executive branch" is Trump. Everyone else is just running around making up excuses for whatever his last decision was.

The "goal" is whether Trump feels like (not) having tariffs and whatever value he feels they should be.

There is no "they": it's just Trump (or maybe whomever he last spoke to that could change mind).

[caycep]

this seems like an awfully convoluted and self defeating way to drive down bond yields....

[partiallypro]

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.

[TomK32]

> 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?

[cavisne]

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).

[fhub]

Trump has been in love with tariffs since at least 1988. See https://www.wita.org/trade-news/trumps-love-for-tariffs-bega....

[ruph123]

Can someone ELI5 this?

[lossolo]

Yeah, that seems accurate.

"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."

https://www.cnn.com/politics/live-news/trump-tariffs-cnn-tow...

[maxerickson]

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.

[_DeadFred_]

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.

[marcosdumay]

> But then something flipped.

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.

[confidantlake]

Why is this weird conspiratorial 5d chess theory voted to the top?

[varjag]

You read too much into it. Trump is manipulating the market for personal enrichment, in the most mundane manner.

[energy123]

Most upvoted comment is AI generated slop.

[monero-xmr]

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.

[magicloop]

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.

[shaky-carrousel]

Trump has been talking about tariffs since the eighties.

[roland35]

I have a feeling the real reason is just that trump is a moron. I think a lot of people are reading it like poop sneered on the bathroom wall.

[Spooky23]

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.

[vkou]

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.

But what do I know? /s