The name’s bond. Treasury bond. The only force that has so far been able to stop Donald Trump, or at least make him rethink, is the US Treasury market. Republicans are supine; Democrats are in disarray; chief executives have taken cover; and America’s foreign partners tiptoe around Trump like he’s a minefield. Some judges are throwing sand into the gears. But they have not reversed Trump’s direction. Aside from Russia’s Vladimir Putin, what Trump fears most is the rising price of money.
But his fear is episodic. Twice now, US Treasury bond prices have dropped sharply in tandem with a weakening dollar. Foreign investors want to be better compensated for the risk of owning US debt. Since lower bond prices mean higher yields, the dollar and Treasuries usually go opposite ways. On the first occasion in April, Trump paused his global tariff war for 90 days. Bond prices recovered. On the second, last week, Trump resumed economic war with the EU, vowing a 50 per cent tariff. He also threatened Apple’s iPhone with 25 per cent duties. A US bond market conniption plus a “very nice call” from the president of the European Commission, Ursula von der Leyen, have on cue persuaded Trump to declare another pause.
Trump is by no means the only culprit for America’s mounting public debt, which at 123 per cent of GDP is at its second highest since the second world war. Since Bill Clinton balanced the budget, successive US administrations have added to the deficit. With the exception of Barack Obama, who tried to strike a grand bargain with Republicans, every other president has ignored America’s deteriorating finances. The worst offenders were George W Bush and Trump, who made large unfunded tax cuts. A close third is Joe Biden, who made little effort to raise taxes to pay for higher spending.