Explained: How US bond market fury stopped Trump’s trade war

The past ten days have been a turbulent period for the global economy, with volatility shaking key markets and raising concerns about broader economic stability.

On April 2, US President Trump invoked the International Emergency Economic Powers Act to announce his “Liberation Day” tariff policy, which applied to imports from all countries except Canada and Mexico.

The policy featured a two-tier structure: first, a baseline 10% tariff on imports from all nations; second, country-specific “reciprocal” tariffs targeting what the US government considered unfair trade practices by around a hundred countries, with China being a primary target.

But by the end of the week, Trump yielded to mounting pressure from the bond markets and dramatically reversed course. On April, he suspended the additional tariffs on most countries, but in a stark move, he escalated duties on Chinese imports to a staggering 145%.

Trade tariffs are designed to protect domestic producers by making foreign goods more expensive. In the early 20th century, tariffs imposed at ports gave US manufacturers a competitive edge, helping to fuel a boom in American industry by shielding it from foreign competition.

Trump’s campaign echoed 1920s-style protectionism, adapted for the age of globalisation. With US companies offshoring to low-cost countries like China and India, his message was...

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