Jack Gerson, Oakland CA
4-13-25
From yesterday’s New York Times, on how Trump's actions have injected uncertainty and fear into the bond market
Trump Has Added Risk to the Surest Bet in Global Finance
The U.S. ruling class is used to asserting itself indirectly through the state -- which it has controlled through its control of the two dominant political parties. But Trump, now the head of that state, has, from the viewpoint of most of finance capital, been acting like an out of control loose cannon, at least since his "Liberation Day" announcement.
As long as the ruling elites thought that Trump was just blowing a lot of smoke and would settle on some modest tariff increases, coupled with the tax cuts he wants to give them, they were willing to turn a blind eye to the vain pomposity and the greedy bullying (towards immigrants, Gaza, Greenland, Canada, Panama, Mexico, protective regulations, the social safety net, federal workers, free speech, the courts, whistle blowers, ...).
But when on April 4 they realized that he really was going to impose his half-baked "reciprocal" tariffs at midnight, they became frenzied: a big selloff in the $29 trillion market for U.S. treasuries drove bond interest rates up -- meaning a sharp fall in bond prices. That threatened the lifeblood of the financial system, the ability to settle up financial transactions.
Then China, which still holds on the order of a trillion dollars worth of US treasuries, started contacting countries about establishing alternatives to the U S. based system for settling transactions -- which could have dislodged U.S. financial hegemony. Then what happened? Trump's tariffs went into effect at 12:01am on April 5. Early that morning Trump declared that leaders around the world were kissing his ass (his words). But later that same morning, he called the tariffs off (90 day "pause").
What happened starting on April 4 is that heavy hitters like Jamie Dimon (CEO of JP Morgan Chase) started speaking out in public (Dimon said a recession was probable): Trump supporter (but not puppet) Don Bacon, a Nebraska Congressman, announced that he was going to introduce a resolution asserting Congressional authority with regard to tariffs; prominent Senate Republicans made similar statements (Chuck Grassley, Rand Paul, John Kennedy, as well as Collins, Murkowski, McConnell and a couple of others); foreign heads of state were calling Trump to desperately urge him to rescind the tariffs. And he blinked.
Trump admitted, at least at the time, that the fall in the bond market caused him to halt the tariffs. But his aides all said that the reciprocal tariffs had just been a negotiating ploy, and now -- voila! -- the real target was revealed -- China. And Trump coupled his tariff "pause" with increasing the tariffs on China to 145%. China in return raised tariffs on US goods to 125%. Apple CEO Tim Cook, among others, told Trump his tariffs would ruin their business. China held firm. And, in the matter of four days and then: Trump blinked again, exempting from tariffs the most critical Chinese products -- electronics.
Trump was reined in. But the whole experience has to tell the financial markets and most corporations that there's a loose cannon running the state and acting like the absolute monarch of the world. So I don't think that they are very happy about the prospect of more such turmoil, more erratic behavior as the clown car careens down the road.
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