President Donald Trump’s unexpected decision to delay most of his sweeping “reciprocal” tariffs for 90 days has sparked a fierce debate over the motives and consequences of this abrupt policy shift.
Announced on April 9, the retreat scaled back planned levies to a universal 10% tariff on most trading partners—except for China, which now faces a steep 125% rate—offering a temporary reprieve to jittery financial markets.
While many of Trump’s supporters herald the move as a calculated strategy to strengthen his negotiating leverage, analysts argue it was the bond market’s mounting pressure that forced his hand—a sentiment the president himself partially conceded.
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Trump’s base has rallied behind the narrative that the tariff pause is a masterstroke of brinkmanship, designed to extract concessions from trading partners while avoiding immediate economic chaos.
“This was brilliantly executed by @realDonaldTrump. Textbook, Art of the Deal,” billionaire hedge fund manager, Bill Ackman, who previously advised the president to toe that path, posted on Tuesday, praising the strategy behind the trade maneuver and market timing.
Online, MAGA forums buzzed with claims that the delay keeps foreign leaders guessing, reinforcing Trump’s image as an unpredictable dealmaker.
However, market analysts paint a starkly different picture, pointing to the bond market’s alarming signals as the real catalyst. In the days leading up to the retreat, 30-year U.S. Treasury yields spiked to 4.8%, a level not seen in months, while the 10-year yield hovered around 4.5%. These spikes reflected growing investor fears of a ballooning U.S. deficit, already strained by Trump’s tax cuts and spending plans, and the inflationary fallout of his tariff agenda.
“Bonds should do well in times of turmoil as investors flee to safety, but Trump’s trade war is now undermining the US debt market. The benchmark US 10 year government bond yield actually fell substantially when the US president announced his list of tariffs last week, but lower yields have not been sustained and the market sell-off has now hit US Treasury bonds, with other government debt markets following suit,” Laith Khalaf, head of investment analysis at AJ Bell, said.
Trump himself lent credence to this view during a White House press appearance on April 9.
“People were getting a little queasy,” he admitted, describing the financial mood as “a little bit yippy, a little bit afraid.”
He added that he was closely monitoring a “very tricky” bond market, suggesting that the retreat was, at least in part, a response to Wall Street’s distress. Reports from CNN indicate that Treasury Secretary Scott Bessent warned Trump of “catastrophic” bond market ramifications during tense White House discussions, underscoring the internal pressure to act.
Market Relief, but Uncertainty Lingers
The announcement triggered an immediate market rally, with the S&P 500 surging 9.5% on April 9, clawing back much of the 12% it had lost over the prior four trading sessions. United Airlines and Delta Air Lines soared over 20%, and the U.S. Dollar Index ticked up to 102.8 from 101.9. However, the relief was short-lived—U.S. futures retreated on April 10, signaling that global markets remain skeptical of a lasting resolution.
“The genie is still out of the bottle on policy unpredictability,” warned Deutsche Bank analysts, pointing to Trump’s history of doubling down when challenged, especially with China.
Economists caution that the pause does little to address the underlying risks. Tiffany Wilding of Pimco described the tariffs as “a large and inefficiently applied consumption tax,” predicting a stagflationary mix of slow growth and rising prices. Preston Caldwell of Morningstar pegged the odds of a U.S. recession at 40%, citing persistent inflationary pressures and a slowing economy.
For consumers, the 10% universal tariff—coupled with the 125% levy on Chinese goods—threatens higher prices for everything from electronics to furniture, while small businesses reliant on imported components face a potential squeeze.
The China Factor: A $760 Billion Wild Card
The stakes are particularly high with China, which remains a linchpin in U.S. supply chains and holds approximately $760 billion in U.S. Treasury bonds as of early 2025. Trump’s decision to hike Chinese tariffs to 125%, up from 104%, follows Beijing’s own escalation to an 84% levy on U.S. imports, intensifying a trade war that shows no signs of abating. Analysts now fear that China could retaliate by selling off a significant portion of its U.S. bond holdings, a move that could send shockwaves through the U.S. and global markets.
If China were to dump, say, $200 billion of its Treasuries, the immediate impact would be a sharp rise in U.S. bond yields—potentially pushing the 10-year yield above 5%—as bond prices fall under selling pressure. Higher yields would increase borrowing costs for the U.S. government, already grappling with a deficit projected to exceed $2 trillion in 2025, according to the Congressional Budget Office. This would ripple through to consumers, driving up interest rates on mortgages (potentially from 6.5% to 7.5% for a 30-year fixed rate), car loans, and credit cards, further straining household budgets already pinched by tariff-induced price hikes.
The U.S. dollar could initially strengthen as investors seek safety, but a sustained sell-off might erode confidence in U.S. debt, weakening the currency over time and stoking inflation via higher import costs.
Economist Jeffrey Sachs believes China is unlikely to sit idle with its large foreign exchange reserves and dollars.
“Whether it will act abruptly in a reaction or whether it will gradually continue the direction of a sell off, I don’t know. But it will continue in the direction of disgorging itself of US denominated assets,” Sachs told CNBC-TV18.
China unloading Treasuries has been described as “a nuclear option,” “It’s not just about the direct hit—it’s the signal it sends to other holders like Japan or Europe. Japan, holding over $1 trillion in U.S. bonds, might follow suit, amplifying the chaos.
For American businesses, the fallout from retaliatory tariffs from China is already huge. Manufacturers reliant on Chinese parts—think semiconductors or machinery—would face even steeper input costs, while retailers like Amazon, whose CEO Andy Jassy warned of inevitable price hikes, would pass those burdens onto consumers. Smaller firms, lacking the pricing power of giants like Walmart, could fold under the pressure, potentially triggering layoffs and slowing hiring nationwide.
Concerns of Global Economic Repercussions
Foreign leaders have already voiced alarm. Japan’s Prime Minister Shigeru Ishiba called the tariffs a “national crisis,” while Mexico’s President rebuffed U.S. claims about drug trafficking, scheduling a call with Trump to defuse tensions. Retaliatory tariffs from these nations could hit U.S. exports—agriculture, aerospace, and energy—hard, compounding domestic woes.
Domestically, Trump faced a barrage of pleas from business titans like Elon Musk, JPMorgan’s Jamie Dimon, and hedge fund manager Bill Ackman, all urging restraint. Vice President JD Vance and Treasury Secretary Bessent reportedly joined the chorus, highlighting the bond market’s fragility.
“This wasn’t just about Wall Street,” said a senior administration official, speaking anonymously. “It was about keeping the economy from tipping over.”
As the 90-day clock ticks toward July 2025, concerns over what happens next send ripples through the global economy. However, many believe that the bond market, still on edge with 30-year yields hovering near 4.8%, will be a key barometer.