The Bond Market Is Controlling Trump Now: Why Rising Rates Are A Good Thing

2025-04-15 13:19:34 ET

Summary

• President Trump's tariff announcement has led to market volatility, with significant declines in stocks, bonds, and the Dollar Index, creating a "Sell America" scenario.
• The bond market's reaction indicates declining trust in U.S. debt, with potential selling pressure from European countries and possibly China in the future.
• Rising treasury rates are problematic for Trump, prompting a 90-day tariff pause, but rates continued to surge, increasing financing risks for the government.
• Higher interest rates impact not only the financing of the U.S. government but also the housing market, affecting floating-rate mortgages and future homebuyers.
• The ongoing uncertainty around tariffs is bad for the market. I believe that with permanently higher bond yields, Trump is constrained in his tariff policies, which provides the market with greater certainty.

Introduction

Since President Trump's tariff announcement on April 2nd, the market has been volatile, introducing a level of uncertainty not seen since the COVID-19 pandemic. While I didn't expect Trump to behave this erratically and irresponsibly, I did warn about the danger to the U.S. stock markets, and I advised about better returns in European and German stocks, especially small caps....

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