Trump's Tariff Policies Spark Volatility in the U.S. Treasury Bond Market: Rising Yields and a Shift in Safe-Haven Investments

Taiwan • Business • 04/19 18:06
Trump's Tariff Policies Spark Volatility in the U.S. Treasury Bond Market: Rising Yields and a Shift in Safe-Haven Investments

On April 2, 2025, President Trump of the United States announced a 10% basic tax rate on all imported goods and imposed additional tariffs of up to 54% on China and 20% on the European Union, leading to global market turmoil. The yield on the 10-year U.S. Treasury bond rose from 3.9% to 4.5%, then fell back to 4.33%. The yield spread between long-term and short-term bonds widened to its largest since 2022, indicating market concerns over long-term debt risks. Investors shifted to short-term high-quality bonds as a hedge, reflecting concerns about the stability and creditworthiness of U.S. policies.

Key Updates

04/20 14:37

International grocery stores in the U.S. face import tariffs and supply chain challenges: Small retailers are feeling overwhelmed

In April 2025, international grocery stores in the United States faced challenges due to the import tariff policy implemented by the Trump administration, imposing a 10% tariff on all imported goods and up to 145% on Chinese products. These small, family-run stores that rely on imports are under pressure from rising costs, unstable supply, and losing customers. Business owners from Maryland to Iowa generally feel anxious and are trying to adjust their business strategies to meet these challenges.

04/20 12:36

The United States has imposed tariffs on Chinese goods, causing a surge in the prices of baby products and sparking consumer concerns.

In April 2025, the U.S. government announced a new round of tariff increases on imported goods, specifically imposing a 145% tariff on Chinese goods, causing prices of childcare items such as strollers and car seats to surge. With insufficient domestic manufacturing capacity, the supply shortage worsened. Consumers and retailers faced increased cost pressures, with some brands opting to absorb some of the tariff costs. Medical institutions were also impacted by their reliance on imports, heightening the supply chain's vulnerability.

04/20 07:06

Lai Cheng-i, Honorary Chairman of the Taiwan General Chamber of Commerce: How the Tariff War Affects Taiwan's Real Estate Market and Creates New Opportunities for Cross-Strait Industrial Cooperation

Lai Cheng-yi, Honorary Chairman of the Taiwan General Chamber of Commerce, stated at the "Cross-Strait Grassroots Livelihood Development Forum" that the US-China trade war and the US's high tariff policy towards Taiwan will affect Taiwan's consumer structure and domestic demand market within one to two years, but housing prices are not likely to drop in the short term. Lai is optimistic about a recovery in China's real estate market and suggests that Taiwanese businesses boost domestic sales and enhance digital marketing, and foster cross-strait high-tech manufacturing collaboration to meet the demands of global supply chain restructuring and industry upgrades.

04/20 02:37

Nearly a thousand economists have jointly criticized Trump's tariff policies, warning that it could lead to an economic recession.

In April 2025, nearly a thousand economists jointly published an open letter criticizing President Trump's tariff policy, stating that the calculation method is flawed and lacks an economic theoretical basis, potentially leading to an economic recession. Signatories include Nobel Prize winners in economics, James Heckman and Vernon Smith, and former senior government economic advisors. This statement has drawn both domestic and international attention to U.S. trade policy, pointing out the political motivations behind the policy and its impact on global markets.

04/19 22:04

Taiwan's industrial computer manufacturers respond to U.S. tariffs: Price hikes and plans to set up U.S. factories are advancing in tandem

The Taiwanese industrial computer industry is responding to the U.S. reciprocal tariff policy, with large companies like Advantech, Avalue Technology, and ADLINK negotiating price increases with clients, while medium and small-sized companies like Axiomtek and Vecow are setting price hikes of 5% to 10%. Avalue Technology plans to move its factory setup from Mexico to Tennessee, USA, with production expected to start in the third quarter of 2025. Advantech is considering setting up PCB assembly capabilities in the U.S. Medium and small-sized companies like Axiomtek and Vecow have completed their manufacturing setups in North America, showcasing their flexibility and adaptability.

04/19 18:06

Trump's Tariff Policies Spark Volatility in the U.S. Treasury Bond Market: Rising Yields and a Shift in Safe-Haven Investments

On April 2, 2025, President Trump of the United States announced a 10% basic tax rate on all imported goods and imposed additional tariffs of up to 54% on China and 20% on the European Union, leading to global market turmoil. The yield on the 10-year U.S. Treasury bond rose from 3.9% to 4.5%, then fell back to 4.33%. The yield spread between long-term and short-term bonds widened to its largest since 2022, indicating market concerns over long-term debt risks. Investors shifted to short-term high-quality bonds as a hedge, reflecting concerns about the stability and creditworthiness of U.S. policies.

04/19 16:36

Faced with rising costs of baby products due to tariff pressure, new parents in the United States are turning to second-hand markets.

The United States has imposed tariffs as high as 145% on Chinese goods, leading to a spike in the prices of baby products and toys, impacting how new parents raise their children. With nearly 90% of these products being imported from China, many families are turning to the second-hand market to manage the high costs. The increased demand for second-hand goods shows how American families are adjusting their lifestyles in response to trade policies.

04/19 15:35

Mazda has temporarily suspended CX-50 exports to Canada due to the US-Canada trade tariff conflict, leading to inventory shortages for dealers.

Mazda Motor Corporation announced on April 18, 2025, that due to the trade conflict between the United States and Canada, it will temporarily suspend exports of the CX-50 from its Alabama plant to Canada starting May 12. This decision is in response to the United States imposing tariffs on Canadian goods and Canada's retaliatory tariffs. Mazda emphasized that this suspension is indefinite, and future supply is uncertain. Canadian dealerships have only a small amount of inventory remaining, and once sold out, there will be no restocking, resulting in a gap in the local product lineup.

04/19 14:37

The U.S. toy industry is under pressure due to Chinese tariffs, which may impact Christmas sales.

The United States has imposed tariffs as high as 145% on Chinese goods, causing a major impact on the toy industry. As a key industry dependent on the Chinese supply chain, toy manufacturers warn that the trade war could result in price hikes, fewer product choices, and impact Christmas sales. Major brands such as Hasbro and Mattel have experienced a drop in their stock prices, while small businesses are facing challenges from supply chain disruptions and rising costs. The industry is worried about facing the dual challenges of product shortages and price increases this Christmas.

04/19 14:05

India and the United States Begin Trade Deal Talks: Aiming for $500 Billion in Trade Value by 2030

India and the United States are set to hold high-level trade talks in Washington from April 23 to 25, 2025, to kick off negotiations for a bilateral trade agreement covering 19 chapters that include trade in goods, services, and investment. Both countries aim to boost trade volume from $191 billion to $500 billion by 2030. The negotiations coincide with a 90-day tariff suspension period announced by President Trump, and both sides hope to leverage this window to speed up the agreement process.

Trump's Tariff Policy Triggers Bond Market Turmoil

On April 2, 2025, President Trump announced the "Liberation Day" tariff policy, imposing a 10% base tariff on all imported goods, with additional tariffs of up to 54% and 20% on major trading partners like China and the EU. This move shocked global markets, causing a sharp drop in U.S. stocks and a depreciation of the dollar, and quickly affecting the U.S. Treasury market.

Initially, the market treated U.S. Treasuries as a safe haven, temporarily boosting bond prices. However, as the tariff policy took effect on April 5, and Trump threatened to double the rates over the weekend, market confidence took a nosedive. Investors began to question the fiscal stability and policy consistency of the U.S., leading to a massive sell-off of U.S. Treasuries.

10-Year Yield Experiences Volatility

According to reports from the United Daily News and Dow Jones Market Data, the 10-year U.S. Treasury yield rose by 4.9 basis points in a single day on April 17, marking the largest single-day increase since April 11. Although the yield fell by 16.6 basis points for the week, the overall volatility indicates extreme market instability.

The sharp changes in yields reflect investors' high uncertainty about future inflation and interest rate trends. Bond prices and yields have an inverse relationship, so when investors sell bonds, yields rise. The 10-year yield surged from 3.9% to 4.5% before falling back to 4.33%, indicating growing concerns about the U.S.'s medium- to long-term fiscal and economic outlook.

Widening Yield Spread Reaches Three-Year High

More noteworthy is the change in the yield spread between long and short-term bonds. As of April 17, the yield gap between the U.S. 30-year and 2-year Treasuries widened to 1.015 percentage points, the widest spread since January 2022. This phenomenon is usually seen as a warning sign of increased market demand for long-term risk premiums.

Under normal circumstances, long-term yields being higher than short-term yields is reasonable, but a rapid widening of the spread may reflect market concerns about the sustainability of long-term debt and inflation risks. Analysts point out that the Trump administration's simultaneous push for high tariffs and a $5 trillion tax cut plan has led the market to expect further deterioration of the U.S. fiscal deficit, forcing the Treasury to issue more long-term bonds, thereby pushing up long-term yields.

Safe-Haven Funds Shift to Short-Term Quality Bonds

During this wave of bond market turmoil, investors' hedging strategies have also changed significantly. Traditionally, U.S. Treasuries are seen as the "last safe haven," but this time the market has experienced a failure of the safe-haven status. According to the Economic Daily News, foreign central banks and large institutional investors have been reducing their holdings of long-term U.S. Treasuries for four consecutive months, instead increasing their holdings of 1- to 3-year short-term bonds.

Jeffrey Gundlach, founder of DoubleLine Capital and known as the "Bond King," suggests that the current market should adopt a defensive approach, avoid leveraged trading, and hold short-term, high-quality bonds to reduce volatility risk. His fund currently holds 25% to 30% in cash, indicating a highly cautious attitude towards the market outlook.

Additionally, institutions like HSBC and Cathay Securities Investment Trust recommend that investors focus on investment-grade short-term bonds and avoid high-risk operations during market turbulence. This strategy not only helps stabilize asset allocation but also retains flexibility for when the market stabilizes in the future.

Bond Market Volatility Reflects Confidence Cracks

The severe volatility in the U.S. bond market is not just a reflection of interest rate or inflation expectations but also reveals deeper concerns about the stability and credibility of U.S. policy. Both Deutsche Bank and the Brookings Institution warn that if the safe-haven status of the dollar and U.S. Treasuries continues to waver, it will have profound implications for the global financial system.

According to Yahoo Finance, the dollar has depreciated by more than 9% against major currencies since early April, and the rise in U.S. Treasury yields also means that the U.S. government's future borrowing costs will significantly increase. These changes are gradually undermining the U.S.'s status as a global safe haven for capital.

References

People Also Ask...

faq

How does Trump's tariff policy affect our local economy?

faq

Will Trump's tariffs keep affecting investment strategies by causing fluctuations in the U.S. bond market?

faq

How do Trump's tariffs affect the safe haven role of the U.S. Treasury bond market?