TL;DR
Trump’s trade war almost tanked the economy because his policies spooked bond markets. It was a 2008 waiting to happen, and he only backed down when the damage became unavoidable. What did we gain in this manufactured crisis? Little.
Story
Trump’s trade war brinkmanship almost triggered a financial crisis, revealing just how fragile our system is. Imagine a Jenga tower—Trump kept pulling blocks, ignoring the wobble, until Treasury Secretary Bessent warned him the whole thing was about to collapse.
The “block” in question? US Treasury bonds. They’re usually seen as safe bets, like gold. But Trump’s erratic policies spooked investors, making them dump these bonds. This pushed up interest rates—bad news for mortgages, business loans, and the economy. It’s like 2008 all over again, where risky bets threatened the entire system.‣ Treasury Bonds: Loans investors make to the government. ‣ Interest Rates: The cost of borrowing money.
This fiasco shows how interconnected everything is. Trump’s trade war wasn’t just about tariffs; it shook investor confidence in the US dollar itself. This brings to mind Buffett’s analogy – if an investor dumps US dollars, they simply buy some other assets. It highlights the dynamics of a currency backed by the full faith and credit of a government and its people. Remember Enron? Its collapse started with accounting tricks but ended up costing thousands their jobs. Trump’s trade war could’ve had a similar domino effect—starting with bond markets and ending with widespread economic pain.
Some analysts warn China could weaponize this by dumping its US bond holdings. This would further increase interest rates and weaken the dollar. It’s a game of chicken with the global economy at stake, a strategy Trump played badly. He backed down only when the bond market wobble became alarming. While the trade war was won, the markets were the real winners in this battle.
Advice
Diversify your investments and keep an eye on bond markets. Political stunts can have serious economic consequences—don’t get caught off guard.
Source
https://www.reddit.com/r/stocks/comments/1jvlcb7/cnns_sources_say_that_us_government_bonds_were/