Trump's tariff policy may have failed in the bond market──The author of "The Bitcoin Standard" analyzes the economic impact.

## Issues of Trust in U.S. Assets

The author of “The Bitcoin Standard,” Saifedean Ammous, stated on the 24th that “Trump is at war with the bond market, and the bond market has won.” Ammous harshly criticized the impact of President Trump’s import tariff policy on the financial markets, pointing out that it highlights the economic characteristics of Bitcoin (BTC) in an era of global uncertainty.

According to Mr. Amus, the Trump administration attempted to introduce tariffs with the aim of lowering bond yields to make U.S. debt sustainable. Although on the first day it could be presented as a “small price to pay for fiscal sustainability” due to the stock market crash, the bond market subsequently also collapsed. He analyzed that “if the government disrupts the finances of domestic companies with reckless tariffs, the normal market correlation (the inverse correlation between stock prices and U.S. Treasury prices) will not be maintained.” In the end, the administration, panicked by the rise in bond yields, was forced to change its tariff policy in just two days.

Regarding this sudden shift, Mr. Amus pointed out that “the fiscal situation in the United States is bad, and the idea that tariffs can solve this is mathematically impossible.” He explained that even if the current annual tariff revenue of about $80 billion were increased tenfold, it would have only a small impact on the fiscal deficit, and in the first place, an increase in tariff rates would lead to a decrease in imports, so an increase in revenue is not expected. He also warned that the instability of the regime, akin to a “banana republic of the third world,” where companies cannot predict tariffs for next week or next month, is slowing down investment and further exacerbating the problem.

Mr. Ams pointed out that when comparing the economic situations of the U.S. and China, China has public debt at 80% of GDP and a 10-year bond yield of about 1.65%, whereas the U.S. has debt at 120% of GDP and a yield of about 4.4%, indicating a severe situation. (The higher the yield, the greater the burden of repayment for the government.)

Furthermore, it pointed out that “China’s dependence on imports from the United States is low, and the amount of imports from the United States per Chinese person is only about 1/12 of the amount of imports from China per American person,” highlighting the contradiction that while the Trump administration is convinced that it “holds the trump card,” in reality, there is a high degree of dependence on China.

According to a report by The Wall Street Journal on the 24th, the market rose following reports on the 23rd that the U.S. government is considering lowering tariffs on imports from China. However, concerns over unstable economic policies have not easily dissipated, and it is suggested that a “risk premium” may be applied to U.S. assets in the future. Additionally, it is noted that the amount of U.S. stocks held by foreign investors has increased about fivefold since 2011, now accounting for one-third of the U.S. stock market capitalization, indicating a growing reliance on foreign capital.

Source: WSJ

Mr. Ams has concluded that, in light of this situation, “China does not need to surrender, and even if it did, it would not have the power to eliminate the U.S. trade deficit. The trade deficit is purely a product of the U.S. money printer,” urging the administration to abolish tariffs and understand the basic economic principle of comparative advantage.