Bond Market: 2 — World Leaders: 0

"We're not looking at that.”

That remark from President Trump on the 7th of April was in reference to a rumoured 90-day pause on his tariff regime, a regime that promised to bring jobs and manufacturing back to the United States by ramping up trade protectionism to levels not seen since 1923. Those five words caused a $4 trillion stock market sell-off, worth roughly the GDP of Japan in just a few minutes.

Things were already on the ropes for the US economy, the tariff announcements caused global pandemonium on the stock market with key indices including the S&P 500, which tracks the top 500 US companies, falling by as much as 18% from its peak in February. Globally $10 trillion was wiped off the face of the earth (worth roughly 10% of the world's GDP). The dollar also did an impressive swan dive against almost every currency which threatened to push inflation up to 4.3%. In the face of all this, and a pretty dark forecast from J.P Morgan that the risk of a US recession had risen to 60% for 2025 ,Trump told the masses “Don’t be Weak! Don’t be Stupid! Don’t be a PANICAN (A new party based on Weak and Stupid people!)”

Less than two days later, Trump announced they were, in fact, considering the pause and subsequently suspended higher tariff rates, replacing them with a universal 10% rate instead.

The reason? Trump achieved a rare hat-trick: not only were the currency and stock markets down but so was the bond market. On Wednesday afternoon 10-year US treasuries started selling off, hard. The yield climbed from 4.45% to just over 5%.

This is crucial because the US debt market is considered a 'safe haven' during times of global uncertainty. Debt, particularly government bonds, is seen as safe because it is backed by the full faith and credit of the issuing government, which is less likely to default compared to other financial institutions. Typically, when stock markets sell off, some of that capital is redirected into these safer assets. However, when all three markets: stocks, bonds, and currencies decline simultaneously, it signals a collapse in confidence in the government's stability. This situation makes managing debt more costly for governments, and as one UK Prime Minister learned, it can even mark the end of a political career.

Even Trump had to acknowledge the market going from bad to worse. He told the press he was watching the bond market after saying he had noticed that people “were getting yippy.” On Wednesday afternoon, Trump mentioned that the markets had looked "pretty glum" and investors “queasy”.

Whilst the bond market may have spared us from the worst of the tariff policies, the uncertainty is here to stay. After a brief rally stock prices are headed downwards again. The average tariff rate the US is imposing on the world has only fallen from 27% to 24% and the trade war with China is ramping up with both sides having put over 100% tariffs on each other. However, Trump may now be looking for an off-ramp saying he would be eager to make a trade deal with China.

The bond market brought Trump back to the negotiating table and perhaps Alexandra Scraggs at the Financial Times put it best “Dear Bond Vigilantes…I owe you an apology. I wasn’t really familiar with your game.”