The chink in US President Donald Trump’s armour was revealed on Wednesday (April 9) when he suddenly paused imposing his high new tariffs on most major trading partners, except China, for 90 days. He had not hesitated to go ahead with his tariffs despite global stock market routs. The billions of dollars lost by companies and investors in share markets jittery about the tariffs could not sway him. But when the panic engulfed the bond market, where US government debt is bought and sold, the president reacted like any ordinary debtor trying to placate his creditors – he gave in.
That is what The Times says in a report headlined “Donald Trump meets an opponent he can’t face down: the bond market”.
Bond market reaction
The report, dated April 9, says,” The president’s standoff with financial markets took a dangerous turn in the last 48 hours, as Wall Street traders dumped US government debt, raising 30-year borrowing costs to 5 per cent—a two-year high.”
The 30-year US Treasury bonds issued by the US government to raise money are considered a safe haven investment, especially during times of economic uncertainty. They are considered safe investments because they are backed by the credit of the US government.
But the global trade war that Trump’s tariffs looked likely to unleash unsettled the bondholders. They value predictability and reliability, said The Times, while Trump threatened disruption. That triggered a selloff of US government debt – a dire situation for America with its huge trade deficit and need to borrow from others. China, for example, held $760 billion in US foreign debt as of January 2025, according to CNBC.
Trump cannot afford a selloff of US government debt. He has to assure the bondholders their money is safe.
Trump needs money to offset tax cuts
One may ask why then Trump slapped hefty tariffs that were sure to rattle the market.
But the bond market didn’t panic as quickly as the stock market. The selloff of US government debt began later.
Besides, Trump has to raise revenues from other sources to offset tax cuts. “Trump had vowed to use about $800 billion from his impending tariff revenues to fund mass tax cuts that are due to expire at the end of the year,” says The Times.
CNN also says that “fears of a bond market catastrophe convinced Trump to hit the pause button” in the tariff war.
“The bond market is very tricky, I was watching it,” Trump told reporters. “The bond market right now is beautiful. But yeah, I saw last night where people were getting a little queasy.”
Surprising turn
Even some of his own aides and advisers were taken by surprise by his policy reversal.
“It looks like your boss just pulled out the rug from under you and paused the tariffs,” Democratic Representative Steven Horsford of Nevada told US Trade Representative Jamieson Greer during a hearing on Capitol Hill when Trump made his announcement. Greer had given no indication that a change was coming.
The U-turn followed intense discussions from Tuesday evening (April 8) to Wednesday morning (April 9) when Trump and his advisers spoke to several Republican lawmakers and foreign leaders, said the Washington Post.
Trump, as usual, stressed the importance of his new decision. “I guess they say it was the biggest day in financial history,” he said. If not the biggest, it was certainly a big day in financial history when the bond market made Trump pause his tariff war.
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