Donald Trump spooked

While the threat of an awkward phone conversation with Australia’s prime minister appeared to have no effect on Donald Trump’s rather erratic tariff announcements, the mood of the bond market was a different thing entirely.

- John Dyall

On April 2 he announced “Liberation Day” with the imposition of a broad range of very high tariffs imposed on products entering the US.

The bond market reacted in two ways. The first reaction was similar to the stockmarket. Bond buyers and sellers thought the tariffs were a bad idea that would lead to higher inflation (prices to US consumers would rise) and lower economic growth. This is what is called stagflation, a malignant set of economic circumstances not really seen in developed nations since the 1970s.