Why the Bond Market Holds Sway Over Trump

Alarming declines in the stock market and recession warnings didn’t faze President Trump after he announced steep tariffs on dozens of countries.But tremors in the market for U.S.

government bonds made him flinch.This revealed Mr.Trump’s pain point, showing what it took to force him to alter a signature economic policy.

He had been watching the bond markets, he told reporters, and thought investors had gotten “a little queasy.”These episodes suggest that what the White House is able to achieve during Mr.Trump’s second term may largely depend on how the bond market responds, setting up a tug of war on trade policy, tax cuts and more.U.S.

government bonds are essentially loans to the Treasury, considered one of the safest bets in finance.These bonds comprise an enormous, multi-trillion-dollar market that everyone from individual investors to pension funds, multinational companies and even foreign governments invests in.That’s why sharp moves can be so stomach-churning, including for the president of the United States.

Waves of selling after Mr.Trump’s on-again, off-again tariff pronouncements have put investors on edge, even after the market recently stabilized somewhat.The bond sell-off has also been accompanied by a decline in the value of the dollar.

That has fueled fears that investors may be souring on the United States, long the unquestioned focal point of the world economy....