*The Wall Street Journal* has criticized Trump's tariffs policy as the largest economic blunder in decades, shaking global market confidence.

In April 2025, The Wall Street Journal criticized former President Trump's tariff policy as the biggest economic blunder in decades, arguing that its instability has undermined global market confidence. Trump's attempts to meddle with the Federal Reserve and his trade war strategy have sparked a crisis of confidence in capital markets, jeopardizing U.S. financial stability. Japanese investors have engaged in a massive sell-off of U.S. bonds, indicating a significant loss of confidence among foreign investors. Experts warn that the tariffs could lead to stagflation in the U.S. economy and advise Trump to end the tariff offensive to stabilize the market.

Market Turmoil Triggered by Tariff Policy

On April 2, 2025, Trump announced high tariffs on goods from multiple countries, and on the 9th, he announced a 90-day suspension of implementation. Despite the temporary suspension, global financial markets have already reacted violently. U.S. Treasury bonds and the dollar were simultaneously sold off, assets that were once considered the world's top safe havens have now lost their appeal. Investors are turning to other currency assets like the euro and yen.

The Wall Street Journal pointed out that the root cause of this market turmoil is the unpredictability and inconsistency of Trump's policies. Although newly issued U.S. Treasuries still have buyers, the 30-year Treasury yield saw its largest weekly increase since 1987, indicating that market confidence in U.S. long-term debt is wavering.

Japanese Investors Sell U.S. Treasuries, Signs of Capital Flight Emerge

According to data from Japan's Ministry of Finance, during the week Trump announced the tariffs, Japanese private investors sold as much as $17.5 billion in long-term U.S. Treasuries, marking the largest sell-off by foreign investors since the 2024 U.S. election. Bank of America analysis indicates that this reflects a rapid loss of confidence in U.S. assets by foreign investors.

The Wall Street Journal further analyzed that the key to the surge in Treasury yields is not a single sell-off event, but rather the inability of capital inflows to keep up with the pace of the U.S. trade deficit. This capital gap reduces the attractiveness of dollar assets and raises doubts about the safety of U.S. Treasuries.

Tariff Policy and Political Interference with the Federal Reserve

Trump has sparked controversy not only in trade policy but has also publicly pressured Federal Reserve Chairman Jerome Powell to cut interest rates multiple times, even threatening to remove him. The Wall Street Journal editorial criticized Trump's actions as "preparing to scapegoat Powell," attempting to shift the blame for the economic downturn onto the Federal Reserve.

The paper emphasized that the Federal Reserve is an independent institution, with policies requiring a vote by 12 board members, and the President has no authority to unilaterally replace all members. Even if Trump succeeds in replacing the chairman, he cannot control the overall direction of monetary policy. The editorial stated, "Trump can bully everyone, but he cannot bully Adam Smith or rewrite economic principles."

Economic Consequences of Tariff Policy: Inflation and Stagflation Risks

Trump's tariff policy has already had a substantial impact on the U.S. economy. According to Adam Posen, president of the Peterson Institute for International Economics, the probability of the U.S. economy falling into recession is as high as 65%. He pointed out that even if Trump reaches trade agreements with other countries, the newly imposed tariffs may remain, leading to price increases and slowing economic growth, resulting in a typical "stagflation" scenario.

Posen warned that to mitigate the damage caused by tariffs, the Trump administration might subsidize affected businesses, further increasing inflationary pressure. If the Federal Reserve is forced to raise interest rates to combat inflation, it will exacerbate economic pressure, and repairing the damage could take years.

International Trust Crisis and Deterioration of Ally Relations

The Wall Street Journal and other media also pointed out that Trump failed to coordinate with traditional allies to confront China, instead imposing tariffs and issuing threats to allies, leaving the U.S. isolated within the international trade system. Experts believe that if the U.S. could cooperate with European, North American, and East Asian allies to form an anti-China trade alliance, it could effectively reduce its own losses and exert pressure on China. However, the Trump administration's lack of long-term planning and coordination has instead increased uncertainty in the global supply chain.

Criticism and Suggestions from The Wall Street Journal

The Wall Street Journal editorial bluntly stated, "Trump's tariffs represent the biggest economic policy mistake in decades." The paper argues that tariffs are essentially taxes that will stifle economic growth and drive up prices. Even continuing the 2017 tax reform and deregulation cannot compensate for the damage caused by tariffs.

The editorial suggests that Trump should "wisely interpret market signals," quickly end the tariff offensive, secure some victories in trade agreements, and then "quit while he's ahead." However, the paper also noted that the market is panicking because "it's uncertain whether Trump will listen to anyone's advice other than his own intuition."

References

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