Bond market revolt signals fading confidence in US economic leadership
Two years ago, the prospect of a trade war between the United States and Canada, two of the world’s most closely integrated economies, would have been unthinkable. However, US President Donald Trump’s recklessness and capriciousness know no bounds. Last week’s breakdown in negotiations between the North American neighbours, which triggered the imposition of US tariffs of 50 per cent on a wide…
The bond market's recent revolt signals a waning belief in U.S. economic leadership. Following the collapse of negotiations between Canada and the United States, which resulted in tariffs, Prime Minister Carney retaliated by imposing levies on American goods. The U.S. insisted that Canada drop its promotion of French as an official language and agree to restrict trade deals.
The escalating tensions threaten both nations' economies, with Canada being the second-largest trading partner for the U.S. and their two countries sharing deeply integrated automotive supply chains. Trump's policy of raising tariffs on Canadian cars and parts to 50% poses a significant risk to the U.S. car industry. The bond market's discontent is partly due to the inflationary impact of an energy shock and the increase in debt issuance by technology companies.
Long-term bond yields have risen sharply, reaching their highest level since 2007. Treasury Secretary Scott Bessent intervened in the debt market to reduce upward pressure on long-dated bond yields, further exposing the lack of credibility and tensions in U.S. policymaking. The record-high U.S. public debt, exacerbated by half of the increase occurring in the last decade, has increased investor demand for a higher premium to hold Treasuries.
Bessent's actions have raised questions about his credibility and Trump's management of the U.S. economy. The bond market is sending a clear message that the U.S. must address its internal issues.
Written by urgent.news from SCMP Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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