Should You Avoid Long-Term U.S. Treasury Bonds Due to President Trump’s Tariffs?

President Donald Trump’s campaign to raise customs tariffs has highlighted the volatility in the bond market. When he initially announced the highly high tariff rates on imports from most countries, many economists have reduced their estimates of GDP growth. Likewise, traders have submitted their bets that the federal reserve will reduce interest rates based on the hypothesis that the definitions will slow down the American economy and threaten it to recession.

Usually, when similar conditions occur to these, the prices of treasury bonds rise – which means a decrease in their revenues – because the movements in the bond market tend to reflect the investor expectations about economic growth and interest rate guidance. Investors also tend to rush to safe assets when they are concerned about the economic slowdown. In general, when stock prices move down due to the market fears of slowing growth, bond prices tend to rise.

But amid these ground market conditions, long -term returns did not follow its usual stipulation. Initially, the cabinet revenues fell so hard in the conversation of the customs tariff, but in recent days, it rose, with the return of the US Treasury for approximately 10 years, amounting to 4.5 %. Even after Trump put on Wednesday a 90 -day stop at the largest share of the new definitions of most countries except China, the treasury returns was 10 years, as of Thursday, remains 4.35 %.

In light of all this, does investors avoid the US Treasury’s notes in the long run now?

While the rate of federal reserve funds in the field of federal reserve affects the treasury revenues, they are somewhat driven by market expectations. The treasury revenue has been focused several years ago, as bond investors have increasingly focused on American debt mode. The federal government achieved a deficit of more than $ 1.8 trillion in 2024, carrying more than $ 36 trillion in total debt.

There are some reasons for the treasury revenues during the chaos of the customs tariff, and none of them were particularly optimistic about the economy or the stock market. A positive reason for the high return is a renewed belief in economic growth, but merchants instead increases their bets that the Federal Reserve will reduce interest rates. At this point, the medium supply between options dealers remains that there will be three discounts in a quarter price this year, although it is important to realize that these predictions often change.

However, Federal Reserve Chairman Jerome Powell was clear that he would not reduce prices to an economy in full swing, especially with the continued annual inflation that is still on the preferred goal of the Federal Reserve. This means that in the event of discounts at a rate, it is likely to be in the context of supporting the weakening of the American economy or the economy on the edge of the recession.

Another long-term reason like those in US Treasury bonds, which are 10 years and 30-THERD are due to inflation expectations. Economists generally view the definitions as inflationary. Powell said previously that his basic cause is that inflation caused by customs tariffs would be “temporary”, but after Trump imposed a more severe tariff than expected, he warned, warning that his inflationary effect may be “more stable.” High cabinet revenues in response to the market for high inflation will not be a good sign.

Finally, a long -term return in the country’s debt relationship can have a relationship. According to the US Monthly Treasury State Department, the government has about 6.15 trillion dollars from the treasury debts that ripen now and March 19, 2026.

About a quarter of the US debt is owned by foreign investors, according to federal reserve data. Increasing tensions with large US debt buyers – in particular, China – can affect their interest in buying the American treasury. And if these adult holders sell bonds in the quantity, it will increase the treasury supply on the market, which leads their prices to a higher decrease and sophistication.

The billionaire investor, Jeffrey Gundlash, a founder and participated in Delelan Capital, recently said on CNBC if the United States continues to increase its conflicts with other countries, it will be unlikely to continue to buy US debt. Moreover, he said that the potential recession, which would reduce revenues, may expand the US financial deficit that is likely to reach 3 trillion dollars. Gundlach said he believed that the cabinet revenues will rise in the upcoming recession, and that it recommends avoiding long -term bonds. His suggestion: Stay on US Treasury notes for two or three years.

Remember that the prices of bonds and tables have a counter -relationship, so when the prices of bonds decrease, the return rises, and vice versa. When bonds provide buyers higher, pregnant women collect more attention, but generally, they also accept a greater danger to failure to pay, leaving them unable to completely recover their manager. American Treasury bonds have always been seen as guaranteed assets.

However, the increasing debts in the country endanger the distant danger because the government is unable to cover all the debts it has already taken. The interest payments on the national debt consume an increasing part of the annual budget. If bond investors start inhaling problems, they will ask for higher returns to accept these risks, which may send height returns. In a modern analysis, the Rating Agency Moodyz He also cited the declining financial situation, and analysts did not rule out the agency, which reduced its credit rating on the federal government, which Standard & Poor’s first did in 2011.

Fears about financial risks can become self -fulfilling prophecies. If there is even that there are assets or institution that is the main value that is not actually safe, many investors will avoid them.

Consider, for example, the regional banking crisis in 2023. Since account holders in some institutions such as Silicon Valley Bank are starting to worry that there is this opportunity that these banks could be able to go and will not regain their deposits, they withdrew their money, increased the crisis and pushed banks to incompatibility.

All forms of lending are a matter of confidence. Therefore, I would like to say that there is a distant possibility that there may be a problem with the long -term treasury bonds on the line if the government does not get its home, and the handling of the large debt pile will not be easy. Washington is likely to keep pace with its obligations, but again, why do you bear the risk of what is supposed to be one of the fixed assets with fixed income if you are not sure of this what it is?

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Should you avoid long -term US Treasury bonds because of President Trump’s tariff? It was originally published by Motley Fool