Donald Trump has 'Liz Truss moment' with one political enemy he can’t beat

Donald Trump has had his Liz Truss moment.

He’s found out there is one political enemy he can’t beat: the bond market.

The cost of US borrowing had risen steeply during his tariff experiment.

It was clear with a 36 trillion dollar debt, even for the country with the world’s reserve currency, this was a problem.

The 30 bond yield - how much investors are paid to hold US government debt for 30 years - had got higher than Greece was having to pay during its financial crisis.

It may have been partly caused by China dumping bonds to pressure the US to back down.

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This was simply unsustainable, and threatened a sovereign debt crisis which would have taken down the entire world financial system.

Now Donald Trump has bought some time, but this crisis is far from over.

The tariff against China is still at an eye-watering 125%, and every other country including ones who’d previously faced no trade barriers, like Australia, are still contending with a 10 % surcharge for sending goods to America.

Stocks have surged on hopes Trump sees sense, but there is danger he may not.

If the current tariffs remain, inflation will spike, and America may enter a recession along with much of the rest of the world.

The elephant in the room of American politics is the staggering public debt, which at 121 % of GDP is extremely high (admittedly not as high as Japan, but still near the top of the international league table).

Servicing this national overdraft in 2025 will cost more than a trillion dollars, almost as much as the the entire defence budget.

Fiscal Republicans who may consider themselves Reaganite, are constantly declaring spending must be curbed.

But in MAGA land, the fiscal hawks are a rare species - or at least less vocal.

Most parrot the President’s intention to cut taxes and let Americans keep more of their own money.

It sounds good in principle, but it only adds to the debt problem.

The bond markets reflect this with a remorseless logic that no demagogue can talk his way out of.

As former Clinton Advisor James Carville once quipped, he’d like to be reincarnated as the bond market, so he could intimidate whomever he liked.

This week the bond market spoke, and for now Donald Trump is listening.

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