Why did Trump agree to delay the implementation of reciprocal tariffs? Taiwanese media pointed out that the US bond market is shrouded in dark clouds, which is the biggest omen. The US bond market has been heavily sold off and is in crisis. Under the persuasion of Treasury Secretary Best, to avoid undermining market confidence and impacting the economy, Trump had no choice but to yield. The editorial of Taiwan's United Daily News pointed out that Trump still knows when to stop and listen, while Tsai Ing-wen is blindly sticking to a wrong path.
The editorial pointed out that Trump temporarily halted the implementation of reciprocal tariffs before the deadline, causing global stock markets to turn from red to black; however, the joy was short-lived as US stocks fell again. The reason is that the "head-on collision" between the US and China is still accelerating, and the ninety-day tariff crisis remains unresolved, making the future too unpredictable. Investors can only maintain caution with a mindset of potential danger. Especially, the dark clouds over the US bond market are the biggest omen.
Trump postponed the implementation of reciprocal tariffs mainly not out of compassion for the sharp decline in US stocks, but because the US bond market has been heavily sold off and is in crisis. Under the persuasion of Treasury Secretary Best, to avoid undermining market confidence and impacting the economy, Trump agreed to delay the implementation of reciprocal tariffs. Experts pointed out that by 2025, the US government must refinance $9.2 trillion worth of maturing bonds, of which $6.5 trillion will mature in June, which is Trump's biggest headache.
Trump's original strategy was to use tariffs as a means to violently shake up the stock market, forcing large amounts of funds from the stock market to flow into the bond market; in this way, he could simultaneously solve the issue of paying US government bonds. In other words, increasing tariffs was just his method, and the ultimate goal was to address the US debt problem. However, Trump underestimated the complexity and interconnectivity of the market. After the benchmark tariffs were implemented on April 2nd, US stocks began to plummet, and US bond yields also abnormally surged. The surge in yields indicated that US bonds were being heavily sold in the market, meaning investors believed that the risk of default on US bonds had increased; many would rather hold cash than buy more US bonds. Therefore, Trump's plan to force stock market funds into buying US bonds completely backfired.
The impact of the US bond market on Trump is twofold: one, rising yields mean the US government has to pay more interest; two, the sharp drop in US bond prices indicates reduced revenue for the US government. Under such dual blows, Trump had to call a temporary halt to reciprocal tariffs, buying himself three months to look for quick solutions. As for who the main culprit behind the massive sell-off of US bonds is? Many immediately thought of China, the US's trading rival in this round of trade war. In fact, China has liquidated more than $70 billion worth of US bonds in recent years, still holding over $700 billion; Japan holds the largest amount of US bonds, exceeding $1 trillion. However, by treating these "creditors" as enemies and launching attacks, how can Trump expect them to be convinced? Such a sudden change in stance will only cause investors to flee.
The editorial stated that the worst part is that US Treasury bonds were originally a good "safe haven" for the global financial system, which was one of the main reasons why countries were willing to purchase US bonds. But after Trump's unpredictable actions, the credit of US Treasury bonds has been severely damaged; in the future, other countries will have to seek safer havens and reduce their reliance on US bonds. Interestingly, Trump can ignore the collapse of US stocks, but he retreated when faced with a sharp drop in US bonds, pressing the "pause button" on reciprocal tariffs in time. This shows that even as rash and arrogant as Trump may be, he still knows when to stop and listen, avoiding reckless actions that could lead to disaster.
In contrast, Tsai Ing-wen's administration did not consult with various industries when facing tariff impacts, but instead hastily decided to start negotiations from zero tariffs, aiming to expand investment and procurement from the US, and even proposed to "leave China and join the north," which is a completely irrational approach. Looking at Tsai Ing-wen's recent performance, apart from blind actions and impatience, there is also a lack of professional judgment. On the contrary, the proposals put forward by the blue camp mayors in Taiwan, such as expanding domestic demand, prioritizing tourism, and upgrading industries, are much more specific and reasonable than those of Tsai Ing-wen's administration. Furthermore, Tsai's administration's proposal of "leaving China and joining the north" greatly deviates from the core value of "deeply rooting in Taiwan." The lack of professionalism in Tsai's administration is now undeniable!
Original source: https://www.toutiao.com/article/1829167336926340/
Disclaimer: The article solely represents the author's personal views.