Trump prices trigger the sale of American government debts

Confidence in the American economy falls into falls while investors have poured public debt in the context of growing concerns concerning the impact of Donald Trump’s prices.

The interest rate on American bonds – traditionally considered as an investment in “refuge” in times of crisis – increased sharply on Wednesday.

Balayage taxes on goods imported into the United States from a 60 years old came into force at midnight, while a trade war between America and China gathered the pace.

After the United States has gone forward with a tariff of 104% on China products, Beijing retaliated with 84% sample from American products.

The stock markets have dropped sharply in recent days in reaction to Trump in advance with the prices.

However, the sale of bonds – which is essentially an IOU issued by a government to collect funds on the financial markets – poses a major problem for the greatest economy in the world.

The purchase of the debt of the American government, or treasury bills, as they are known, is considered a safe investment because the State will reimburse what it owes.

But Wednesday, the yield – or the interest rate – on American bonds has affected the highest level since February at 4.5%, which makes more expensive for America to borrow money.

Although the rate is of the same level as a few months ago, interest rates to borrow over 10 years have increased sharply in the last 48 hours, against 3.9%.

Some analysts have suggested that the American federal reserve may be forced to intervene if the turbulence continues, in a decision which recalls the emergency action of the Banque d’Engleterre in 2022 following the mini-budget of Liz Truss.

“We do not see any other option for the Fed but to intervene with the emergency purchases of treasury bills to stabilize the bond market,” said George Saravelos, FX research manager in Deutsche Bank.

“We are entering an unexplored territory,” he said, adding that it was “very difficult” to predict how the markets would react in the coming days when the bond market suggested that investors had “lost confidence in American assets”.

Simon French, chief economist of Panmure Liberum, told the BBC that the Fed could decide to reduce interest rates in order to protect American jobs by facilitating the borrowing of companies because they are faced with higher costs against prices.

He said it was a “draw” on the question of whether the United States would enter a recession.

This is defined as a prolonged and widespread decrease in economic activity generally characterized by a leap in unemployment and a drop in income.

JP Morgan, the investment bank giant, increased the probability of an American recession from 40% to 60% and warned that US policy “was moving away from growth”.

The introduction by Trump of prices, which are billed on goods imported from countries abroad, threaten to upset many world supply chains.

American companies that bring foreign goods to the country will pay the tax to the government.

Companies can choose to transmit part or all of the cost of prices for customers, which could increase inflation.

Trump’s plan aims to protect American companies from foreign competition and also to stimulate national manufacturing.

Questions remain on the scale and what type of investors pour American obligations.

There have been speculation certain foreign countries, such as China which has some $ 759 billion in American bonds, could sell them.

Mr. Saravelos said: “There is little room left for an escalation on the commercial front.” The next phase is likely to be an outright financial war involving Chinese property of American assets. “”

But he warned: “There cannot be a winner in such a war. The loser will be the world economy.”