The art of the cave: Trump fought the bond market, and the markets won

Saifedean Ammous, author of The Bitcoin Standard, has criticized President Donald Trump’s fiscal maneuvers, calling the administration’s attempt to manipulate the bond market a catastrophic misread of basic economic principles. 

In an April 24 thread on X, Ammous argued that Trump’s tariff-driven strategy made the bond market worse at the expense of the stock market.

According to Ammous, Trump-aligned economists claim their plan relied on using tariffs to suppress bond yields. For a brief moment, markets responded. Equities and bond yields both tumbled, just enough for the administration to say their plan “was successful.”

Yet, as Ammous explained, bond yields started to rise as soon as investor confidence faltered, meaning the administration could have misunderstood market dynamics. 

“It is cargo cult economics. People observe a reverse correlation between bonds and stocks and assume that anything that crashes stocks must boost bonds,” he wrote.

Ammous: Tariffs will not help Treasury bond yields rise

The Bitcoin Standard author explained that bond yields show how confident a government is in its ability to repay its debt. If companies suffer under tariffs and taxpayers lose wealth, government revenue falls, and yields rise.

“There’s no reason to suppose that the normal gyrations of market participants managing risk and allocations would hold,” he continued, “when the government sabotages the financials of all the country’s businesses with reckless tariffs.”

In the first eight days of April, yields had dropped to a six-month low of 3.9%, but barely a week later, when Trump announced new tariffs on “Liberation Day,” they shot up to 4.4%. 

The US president had to reverse course and issue a raft of exemptions barely two days after April 12. According to Ammous, this took away any leverage the tariffs were supposed to generate. 

“All of the talk about China buckling under the threat of Trump now sounds hilarious in retrospect, when Trump could not keep his tariffs in place for 2 days,” he reckoned.

Even when the White House’s publicly insisted that China must initiate talks, Beijing stayed silent. Ammous said President Trump was “a delusional ex-lover” waiting on a call from Chinese leader Xi Jinping, that wasn’t coming.

The 44-year-old economist asserted that Treasury bonds failed to perform the stabilizing role the Trump administration was relying on to reduce the US debt burden. 

Numbers don’t add up: Tariffs and federal debt

Ammous mentioned that the administration had floated other ideas, like Tesla CEO Elon Musk co-founding the Department of Government Efficiency (DOGE), saving the government $150 billion, which he dismissed as political stunts. 

“Given that they’ve vigorously gone after USAID (under 1% of the federal budget) but no major government department like the DoD, Federal Reserve, or entitlements, DOGE looks less like a fiscal responsibility program and a lot more like a political project targeting the regime’s enemies,” he claimed.

Ammous lambasted the Trump administration for using the premise that tariffs could meaningfully address the budget deficit. For tariffs to replace tax revenue, foreign exporters would have to sell goods at massively inflated prices just to reach US consumers, an outcome he considers impossible.

“The more you raise the tariffs, the less likely people are to import,” he propounded.

The White House insists that it holds leverage over China due to the large US trade deficit. But Ammous believes this is far from the actual case. China, with a public debt of 80% of GDP compared to America’s 120%, and a 10-year bond yield of just 1.65% versus the US yield of 4.4%, appears to be in a better position economically, even without access to US consumers.

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