Bond investors have done what Congress is too cowardly to do. They have also done what the US Senate is afraid to do. They have effectively brought the executive branch of the US government to heel.
The US administration might like to think that they are big and that they are clever. Admittedly, they have full control of the executive branch of government. They also have control of the US upper and lower houses. Additionally, they have, to some extent, control of the judicial system and the media, too.
That has given the US government unprecedented power to do almost anything that it wants to. And worryingly, it has. It has been able to bully smaller countries into submission by threatening them with penal tariffs. In the words of the US government, countries around the world are now beating a path to The White House to kiss the US leader’s backside.
But here’s the thing, the US government is powerless against bond investors. They won’t kowtow to anyone. And we saw just how craven the US government is when bond investors decide to flex their muscle. Buyers of US Treasuries have told the US administration that enough is enough.
They believe that the US administration has totally lost its mind. And they have called time on the ludicrous tariffs that could not only drive America into recession but also bring the global economy to its knees.
Bond investors have dumped US Treasuries in their droves. They sent the yield on 10-year Treasuries soaring from 3.8% to 4.5%. It was Donald Trump’s Liz Truss moment. It was little wonder that he had to make the embarrassing climb down on tariffs.
The tariffs have only been put on hold for 90 days. But bond investors are unlikely to relent until the US administration admits that the tariffs are a stupid idea.
When The White House Press Secretary Karoline Leavitt was asked to comment on the very public spat between Elon Musk and Peter Navarro, she said that “boys will be boys”. Trouble is, countries are run by adults, not by boys.
For now, the world has been given a stay of execution from US tariffs. But bond investors have spoken. And unless the US administration heeds their warnings, it could be game over for America, for American exceptionalism and for American assets, as the world looks to move on without America.
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Disclosure: David Kuo does not own any of the shares mentioned.
