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      Forget Trump’s tariffs, the president’s bond market threat is worse | Heather Stewart

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      When Donald Trump gave an in-flight press conference en route to the Super Bowl last week, it generated a flurry of news, from the fresh threat of steel tariffs to the declaration of “Gulf of America Day”.Much less remarked upon was a throwaway comment about the US’s financial obligations, which underlined the fact that tariffs are far from the only way in which Trump is jeopardising economic stability.“We’re even looking at Treasuries,” the president told reporters. “There could be a problem … It could be that a lot of those things don’t count. In other words, that some of that stuff that we’re finding is very fraudulent, therefore maybe we have less debt than we thought.”The suggestion was that opening up the US Treasury’s data to Elon Musk’s “department of government efficiency” team had identified a money-saving wheeze: why not walk away from some of America’s debt obligations – a “selective default”, as economists call it.Like so many of the serially erratic president’s pronouncements, this one had to be “walked back”, as the Americans call it. Kevin Hassett, his economic adviser, stressed the next day that Trump was referring to other payments that the US Treasury had been making, not its $36tn (£28.6tn) in debt obligations. Hassett suggested the Treasury “had been “sending money out without flagging what it was for”.Yet just entertain for a moment the idea that a US administration might decide it could unilaterally default on even a small portion of its debts. The result would be catastrophic. Because of the dollar’s status as the world’s reserve currency, the yield on US Treasuries – US government bonds – is perhaps the most important benchmark in global financial markets.If investors suddenly began demanding a higher yield – in effect the interest rate – as insurance against the risk they would not get their money back, the effects would ripple through the trillions of dollars of other assets worldwide priced with reference to supposedly super-safe Treasuries.Hassett made clear this is absolutely not an outcome the saner elements of Trump’s administration were aiming for. Indeed, the treasury secretary, Scott Bessent, has said the president wants to bring down the yield on 10-year US government borrowing costs.Yet as a result of Musk’s crazed takeover of the financial plumbing of the state, the US is already welching on its obligations – moral and financial – all over the world.Every day seems to bring fresh examples: health clinics in the developing world being closed because of the dismantling of USAid; researchers whose projects funded by the National Institutes of Health have been put on hold.Officials from the city administration in New York have even claimed the government in effect dipped into the city’s bank account to claw back $80m in federal grants that had already been made.This fast-track austerity is ostensibly aimed at improving the government’s balance sheet – putting the US through “the private equity wringer”, as Wired’s Brian Barrett put it last week.But the Musk/Trump takeover simultaneously risks shattering confidence in US institutions, in a way that is liable to have long-lasting and unpredictable consequences.Five former treasury secretaries warned in an extraordinary New York Times editorial last week of the risks of letting Musk loose on the nation’s financial system.“Any hint of the selective suspension of congressionally authorised payments will be a breach of trust and ultimately, a form of default. And our credibility, once lost, will prove difficult to regain,” they said.Musk has faced legal action and is targeting arms of government with which he has a particular beef, meaning the chances of anything that looks like a formal default remain low.View image in fullscreenBut the whole performance – as exemplified by a rambling Oval Office briefing involving Trump, Musk and his son X (who has the same name as the social media platform formerly known as Twitter) – screams “political risk”, as analysts would call it if it was happening elsewhere in the world.It would not be surprising if efforts to spur the development of alternative global reserve currencies and payments structures – such as those proposed by nations in the global south – are given added impetus by the shenanigans in Washington.The sheer insularity of the Trump administration’s approach was illustrated on Friday when Bessent – supposedly one of the more sensible figures in the administration – said: “The US has a strong dollar policy, but because we have a strong dollar policy it doesn’t mean that other countries get to have a weak currency policy.”In the short term, the most immediate impact of Trump’s plans on the global economy is likely to be via his long-trailed tariffs plan, which will throw sand in the wheels of the international trading system.All of this is likely to dampen growth, and if trade analysts are right that Trump’s latest idea of “reciprocity”, based on each country’s existing tariff and VAT rates, is the opening bid in a negotiation, it may be weeks or even months before any clarity emerges.Given this corrosive uncertainty, markets have so far been remarkably quiescent in the face of Trump’s wayward trade policy, and appear to be relatively unconcerned about Musk’s slash-and-burn mission, for now.They have been putting their faith in the mighty US consumer, and the economy’s powerful and innovative tech sector, to feed the narrative of US “exceptionalism”.But every week of the Trump/Musk show in Washington surely increases the threat of a structural shift in how investors view the US economy – which would ultimately be felt around the world. 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      Why is Trump behaving like a bully over tariffs? Because he can | Gene Marks

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      Why is Donald Trump so obsessed with tariffs? If you ask me, it’s because America is so freaking huge. California’s economy is bigger than the entire UK’s. Texas’s is larger than all of Canada’s. Florida’s is larger than all of Mexico’s. In its entirety the US economy is about eight times larger than both the Canadian and Mexican economies … combined!Trump is a bully sitting on top of the world’s biggest bully – the American economy. Bullies tend to use their fists to overcome others. Sometimes they can be outwitted. But we all know that strength and size means everything.As a bully, Trump uses tariffs as a weapon and he can get away with it. This is what bullies do. He can threaten smaller countries such as Canada and Mexico because he’s bigger and stronger. He can increase tariffs, cut off funding and limit aid to foreign countries because he knows that, without the US, those organizations and governments would be unable to sustain themselves.And sure, using tariffs as a tool will have collateral damage at home. I recently spoke to an association of building materials distributors and they aren’t exactly thrilled with the potential that their costs of Canadian lumber could rise by 25%. Neither are e-commerce businesses that buy products from China, food service companies that sell Mexican produce or energy companies that rely on oil supplies from up north.But then again there are others that love tariffs. Have a conversation – as I’ve done – with business owners that make steel and have been undercut by Chinese imports or those in the kitchen cabinet manufacturing industry who have faced the same unfair trading practices that has cost them customers and caused them to contract their investing and hiring. Or talk to auto manufacturers whose cars are being tariffed almost five times higher when trying to sell their vehicles in Europe versus the other way around. Or the American companies that have been historically unable to sell their milk, cheese, butter and chicken in Canada because they face existing tariffs exceeding 200%.It’s true that tariffs will benefit some businesses and hurt others. And it’s true that the rising costs of some products will ultimately trickle down to the consumer. But many businesses I know are determined not to let that happen.For example, I have clients in many industries who have been quietly building inventory over the past few months to cushion their supply. I know others who have been aggressively finding alternative suppliers both in the US and in countries that are less exposed to higher tariffs. Others are simply finding ways to cut costs by doing things like reducing their property footprint or investing in technology and AI to offset the increase in the prices of materials. These strategies are easier said than done. But I’ve seen them being implemented by smart, forward-thinking leaders.Regardless, let’s agree that for both businesses and consumers Trump’s tariff adventures are not great, particularly in the short term. They’re disruptive. They’re causing significant uncertainty. They affect margins. They could potentially hit shoppers right in the pocketbook at a time when prices are already high and incomes are barely keeping up.But Trump doesn’t care. He enjoys being a bully and he knows that – given the size of our economy and our influence around the world – he can be. Will his bullying result in a more level playing field for American companies? Will it drive more investment and jobs at home? Will it result in limiting illegal immigration or the importing of fentanyl? Is he doing this for the right reason, which is to make America stronger?Is his bullying justified? Is any bullying justified?Maybe, maybe not. Most of the times bullying isn’t justified, so history is not in his corner. Unfortunately, the rest of us running businesses and going to the grocery store have no way of knowing. We may bask in his success. Or we may suffer if he fails. But one thing’s for sure: he told us he was going to do this and this is what the country asked for when he was elected. More

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      Trump announces 25% tariffs on foreign steel and aluminum

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      Donald Trump announced 25% tariffs on foreign steel and aluminum on Monday, ramping up his controversial bid to boost the US economy by hiking taxes on imports from overseas.The modified US duties will be enforced “without exceptions or exemptions”, the president declared, dashing the hopes of countries that hoped to avoid them.Trump first imposed steep tariffs on foreign steel and aluminum during his first presidency. The action announced on Monday night ends exemptions granted to certain countries, and increases the duty rate on aluminum.The changes are not due to come into effect until 4 March, however, according to a White House official – raising the prospect of the Trump administration brokering deals with governments seeking reprieve.Countries including Australia have already been making their case and Trump later said he would give “great consideration” to Australia’s request for an exemption to the steel tariffs due to that country’s trade deficit with the US.Trump first trailed his latest tariff actions on Sunday, adding that he would also announce a further set of reciprocal tariffs later in the week, drawing warnings of retaliation from trade partners.“The steel and aluminum tariffs 2.0 will put an end to foreign dumping, boost domestic production and secure our steel and aluminum industries as the backbone and pillar industries of America’s economic and national security,” Peter Navarro, Trump’s top trade adviser, told reporters.“This isn’t just about trade. It’s about ensuring that America never has to rely on foreign nations for critical industries like steel and aluminum.”Trump will also impose a new North American standard requiring steel imports to be “melted and poured” and aluminum to be “smelted and cast” within the region to curb US imports of minimally processed Chinese and Russian metals that circumvent other tariffs.Trump and his allies, who repeatedly claimed that tariffs could “Make America great again” when fighting to regain the White House, believe that higher taxes on imported steel and aluminum will help shore up US industrial heartlands.The US president said he would announce plans to impose reciprocal tariffs on other countries over the next two days. He signed two proclamations as he spoke to reporters in the Oval Office: one ending waivers granted by Joe Biden to steel and aluminum tariffs instituted during his first term, and the other raising duties on both metals to 25%.He also raised the prospect of future US tariffs on cars, semiconductor chips and pharmaceuticals from markets across the world.Asked about the possibility of other countries retaliating against US tariffs, Trump said: “I don’t mind.”Canada’s industry minister said the US tariffs were “totally unjustified”, with Canadian steel and aluminum supporting key US industries including defense, shipbuilding, energy and autos.“This is making North America more competitive and secure,” Francois-Philippe Champagne said in a statement. “We are consulting with our international partners as we examine the details. Our response will be clear and calibrated.”The European Commission said it saw no justification for the tariffs and said President Ursula von der Leyen would meet US vice-president JD Vance in Paris on Tuesday during an AI summit.In South Korea, the industry ministry called in steelmakers to discuss how to minimize the impact of tariffs.Ahead of a meeting with Trump on Wednesday, Indian prime minister Narendra Modi was preparing to offer to cut Indian tariffs in a range of sectors that could boost US exports to the country, government officials in Delhi said.Trump has previously called India a “very big abuser” on trade, and his top economic adviser Kevin Hassett singled out the country as having “enormously high” tariffs in a CNBC interview.This latest wave of tariffs is different than the one imposed by the White House on China last week, which hit all goods traveling from the country to the US with an additional 10% duty. He also threatened Canada and Mexico with the same blanket tariffs, at higher a rate of 25%, only to agree to a one-month delay before pulling the trigger.Trump signed proclamations that raised the tariff rate on aluminum imports to 25% from the previous 10% that he imposed in 2018 to aid the struggling sector. His action reinstates a 25% tariff on millions of tonnes of steel imports and aluminum imports that had been entering the US duty-free under quota deals, exemptions and thousands of product exclusions.The proclamations were extensions of Trump’s 2018 section 232 national security tariffs to protect steel and aluminum makers. A White House official said the exemptions had eroded the effectiveness of these measures.About a quarter of steel used in the US is from overseas, with Canada, Brazil and Mexico as the top providers. South Korea, Japan and Germany are also key markets.China, hit by a 25% steel tariff during Trump’s first administration that was maintained under Joe Biden, is not a significant exporter of steel to the US. But it is the largest exporter of steel to the world, dominating the global market with typically cheaper products. Some countries then export their own steel products, at higher rates, to markets including the US.Trump’s fixation with tariffs has alarmed economists, who have warned their imposition may derail his repeated promises to rapidly bring down prices for millions of Americans.But Trump has defended his strategy, claiming they could raise “trillions” of dollars for the US economy – and that even the mere threat of import duties can prompt countries to bend to his will. “Tariffs are very powerful, both economically and in getting everything else you want,” he said last week.Reuters contributed to this story More

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      Trump to announce 25% aluminum and steel tariffs as China’s levies against US come into effect

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      Donald Trump has said he will announce new 25% tariffs on all steel and aluminum imports into the US on Monday that would affect “everybody’, including its largest trading partners Canada and Mexico, in another major escalation of his trade policy overhaul.Trump’s pre-announcement came as China’s retaliatory tariffs, announced last week, came into effect. The measures target $14bn worth of products with a 15% tariff on coal and LNG, and 10% on crude oil, farm equipment and some vehicles.The US president, speaking to reporters on Air Force One on Sunday, also said he would announce reciprocal tariffs – raising US tariff rates to match those of trading partners – on Tuesday or Wednesday, which would take effect “almost immediately”. “And very simply, it’s, if they charge us, we charge them,” Trump said of the reciprocal tariff plan.The move on steel and aluminum brought a swift reaction from Doug Ford, the premier of the Canadian province of Ontario, who accused the US president of “shifting goalposts and constant chaos” that would put the economy at risk.Monday’s tariffs would come on top of existing metals duties.The largest sources of US steel imports are Canada, Brazil and Mexico, followed by South Korea and Vietnam, according to government and American Iron and Steel Institute data.By a large margin, Canada is the largest supplier of primary aluminum metal to the US, accounting for 79% of total imports in the first 11 months of 2024. Mexico is a major supplier of aluminum scrap and aluminum alloy.During his first term, Trump imposed tariffs of 25% on steel and 10% on aluminum, but later granted several trading partners duty-free quotas, including Canada, Mexico and Brazil.Joe Biden extended these quotas to Britain, Japan and the European Union, and US steel mill capacity utilization has dropped in recent years. White House spokesperson Karoline Leavitt said that the new tariffs would come on top of the existing duties on steel and aluminum.Trump’s rollout of tariffs has been widely criticised and prompted volatile market reactions and fear of more to come. Beijing has lodged a complaint with the World Trade Organisation, but otherwise has been muted in its response. The tariffs imposed by Trump are far below the level he had threatened during the election campaign, and analysts have said China was prepared for them.Beijing’s actions – which also include investigations into several US companies including Google – were seen by analysts as measured and allowing room for negotiation.Amid wider pushback against Trump’s economic heavy-handedness, French President Emmanuel Macron warned in an interview broadcast on Sunday that he was willing to go “head-to-head” on tariffs with the US president. “I already did so, and I will did (sic) it again.”Macron told CNN that the EU should not be a “top priority” for the US, saying: “Is the European Union your first problem? No, I don’t think so. Your first problem is China, so you should focus on the first problem.”Macron said tariffs would harm European economies but also the US, given the level of economic ties. “It means if you put tariffs on a lot of sectors, it will increase the costs and create inflation in the US. Is it what your people want? I’m not so sure,” he said.He said the EU must be ready to react to US actions, but stressed that the 27-nation bloc should mainly “act for ourselves”. “This is why, for me, the top priority of Europe is competitiveness agenda, is defence and security agenda, is AI ambition, and let’s go fast for ourselves.“If in the meanwhile, we have [a] tariff issue, we will discuss them and we will fix it.”Trump has long complained about the EU’s 10% tariffs on auto imports being much higher than the US car rate of 2.5%. He frequently states that Europe “won’t take our cars” but ships millions west across the Atlantic every year.The European Commission said on Monday it would react to protect EU interests, but said it would not respond until it had detailed or written clarification of the measures. “The EU sees no justification for the imposition of tariffs on its exports. We will react to protect the interests of European businesses, workers and consumers from unjustified measures,” the commission said in a statement.Trump has also flagged tariffs against Taiwan’s semiconductor industry – which he has repeatedly and without evidence accused of stealing US business. Taiwan now appears to be scrambling to prevent that happening. This week senior economic officials will fly to the US to meet their counterparts. Taiwan’s government and state-run petroleum company are also reportedly taking steps to buy more US gas and oil to reduce Taiwan’s trade surplus – a key factor cited by Trump in enacting tariffs.Reuters contributed to this article. More

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      Trump delays key piece of China tariff plan amid threats to other countries

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      Donald Trump halted a key part of his tariff attack on China on Friday, as he threatened to impose new US duties on goods from many more countries next week.Plans to ensure shipments from China to the US worth less than $800 still face tariffs – removing the longstanding duty-free status of low-cast packages – have been delayed to give more time to federal agencies to prepare for the change.At the White House on Friday, however, the president said he would announce new reciprocal tariffs on more countries next week. He did not give any details specifying what the tariffs will be and which countries would be affected.“I’ll be announcing that next week reciprocal trade, so that we’re treated evenly with other countries. We don’t want any more, any less,” Trump told reporters during a bilateral meeting with Japanese prime minister Shigeru Ishiba.On Tuesday, the US Postal Service briefly halted all incoming packages from China and Hong Kong after Trump ended a de minimis provision that allowed low-value packages from China to enter the US duty-free.The provision allowed Chinese e-commerce companies such as Shein and Temu to ship items into the US without having to pay tariffs Trump had enacted on China in 2018. After a 12-hour period, the US Postal Service resumed taking all packages on Wednesday.An executive order, signed by Trump, said he would keep the provision until “adequate systems are in place to fully and expediently process and collect tariff revenue”.The president had removed the duty-free provision as his overall tariff strategy against China, what he says is in response to illegal drugs that are coming in from the country. Trump placed a 10% tariff on all Chinese imports, which went into effect this week.skip past newsletter promotionafter newsletter promotionAny new tariffs will add to the confusion and chaos over global trade Trump has created since he entered office. Trump had originally planned to place 25% tariffs against Mexico and Canada on 1 February but ultimately halted both tariffs after negotiations with the country leaders. Those tariffs are now expected to go into effect 1 March.Reuters contributed reporting More

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      The forgotten faces of Christmas in China | Letter

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      Reading “made in China” on his toys for the first time, my young Chinese nephew asked me innocently whether Santa was Chinese. Oddly, like Santa’s elves, toy assembly workers in China remain remote and faceless to most of us in the west. In Britain, most Asian migrants work backstage, too, kept in kitchens or workshops, taking the first and last train, earning low wages and hidden from our eyes. In many countries this Christmas, instead of being acknowledged for alleviating our cost of living crisis, those foreign workers will be vilified for stealing our jobs and threatened with tariffs whose consequences economists are still not certain about.It is always easier to blame people who remain invisible and voiceless. Although our world has never been so interconnected, and hence our nations so reliant on each other’s labour, Chinese society remains poorly understood. In the west, Chinese people remain enigmatic, the ever-silent and under-represented minority. When scrutinised, it is often with a political lens as well, maybe showing some cognitive bias.The question today should be how much value the free movement of products and people has brought to our nations and how to ensure that it keeps doing so in the future. As evidenced by world history, curiosity and interest towards foreign societies has often been an engine of progress. Christmas is a time to reach out and be thankful to one another: it is hoped that this spirit will continue to animate our politicians and societies in this coming year.Hugo WongAuthor of America’s Lost Chinese; London More