The forgotten consumer

Trade policy, whether in the US or India, is made without taking the largest interest group into account

- MIHIR S SHARMA

In the end, it was an incipient revolt in the bond markets that forced American President Donald Trump into a "90-day pause" in his campaign to impose tariffs on the entire world. According to a blockbuster story in the Wall Street Journal, the two members of his Cabinet with actual experience of the financial markets — Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick — cornered the President to warn him that the bond markets were approaching a meltdown. They chose a moment that Mr Trump's most strident pro-tariff advisor, Peter Navarro, was not around to object — and pestered the President until he tapped out a post for his own social network, Truth Social, that postponed the application of his tariffs.

The two financiers were successful, perhaps, because the one segment of the economy that Mr Trump has a healthy respect for is the people who lend other people money. I suppose that even real-estate entrepreneurs must learn to be serious about such things as interest rates, lender confidence, and the cost of rolling over debt. When the President stated that he was worried people were getting "a bit yippy", he didn't mean ordinary Americans or even the stock markets: He meant the investors who determine the yield on US (United States) Treasury bills. Yields on 10-year Treasuries went up from 3.9 per cent to 4.5 per cent in just a few days.

Governments, even Donald Trump's government, have to listen to bond markets. Liz Truss' ill-fated few weeks as British Prime Minister are a salutary warning of what can happen if they don't.

The people that governments don't listen to are consumers. High tariffs, after all, would hit bond prices only tangentially — their immediate cost would likely be borne by those buying goods in tradable sectors. Yet it wasn't consumer panic that led Mr Trump to hold off. He seemed willing to endure it.