Trump tariffs spark US government debt sell-off
Confidence in the US economy is rapidly declining as investors offload government debt, spurred by increasing worries over the effects of Donald Trump's tariffs.
Governments issue bonds—essentially IOUs—to raise funds for public expenditure, offering interest in return.
The US typically enjoys low interest rates on its debt since its bonds are considered a safe investment. However, on Wednesday, rates surged dramatically, reaching 4.5%.
This spike followed Trump's decision to enforce broad tariffs on imported goods, further escalating the trade war with China.
Following the US's imposition of a 104% tariff on Chinese products at midnight on Wednesday, Beijing retaliated with an 84% tariff on American goods.
Stock markets have been experiencing significant declines in recent days, driven by the intensifying global trade war and concerns that tariffs will lead to higher prices.
However, the selling of bonds in the US presents a serious issue for the world’s largest economy.
The interest rate, or yield, on US government bonds with a 10-year term has surged in the past few days from 3.9% to 4.5%, reaching its highest point since February.
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