Markets Rebound After Trump Tariff Backdown but Bond Market Tells a Deeper Story

Highlights:

• Donald Trump delays sweeping tariffs after bond market backlash
• US 10-year Treasury yield climbs to 4.36% at the time of writing
• Economists still expect tariffs to drag US GDP despite the backtrack

Trump Retreats Under Bond Market Pressure

Donald Trump’s sharp pivot on proposed tariffs sent a wave of relief through global markets, triggering a major rally. But beneath the surface, market analysts are warning that the underlying concerns haven’t disappeared.

At the time of writing, the US 10-year Treasury yield stands at 4.36%, up from around 4% earlier in the week. The jump signals investor anxiety over the government’s trade and fiscal outlook, especially after Trump’s proposed tariff plan sparked fears of inflation and economic slowdown.

S&P 500 Sees Biggest Rally Since GFC
Following Trump’s decision to delay the full implementation of tariffs, the S&P 500 surged by 9.5%—its strongest single-day gain since the global financial crisis. Australia’s sharemarket is expected to mirror the rally, posting its most significant one-day rise in five years.

While the relief rally was strong, economists say the revised tariff plan is still likely to hurt growth. Evercore ISI analysts estimate that the modified approach—locking in 10% tariffs globally (except China, which faces 125%)—will keep the average US tariff at 25%.

Structural Challenges Persist
Despite the backdown, analysts like UBS’s Mark Haefele warn that the elevated tariff rates could strain US consumers and firms, contributing to a shift in global supply chains. Former Australian Prime Minister Paul Keating echoed that sentiment, calling tariffs "the death rattle of a society in decline."The immediate crisis may be averted, but the bond market’s reaction suggests deeper concerns about the US economy remain unresolved.

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