Trump’s plan is a ‘Yield War’ or just a whole lot of hot air?

-

You think Trump’s tariffs are all about protectionism and geopolitics? Think again. Eric Demuth, CEO of Bitpanda, has a different take.

He believes these tariffs are less about shielding American industries and more about managing the U.S. government’s massive debt. It’s a “yield war,” not a trade war.

Another perspective

Demuth’s argument is simple yet intriguing. The real goal behind these tariffs is to slow down the U.S. economy, which in turn drives down the 10-Year Treasury Yield.

This yield is pretty imporant because it affects how much the government pays in interest on its debt.

With $9 trillion in Treasury bonds maturing by 2026, every basis point shaved off means billions saved over the next decade.

It’s like playing a high-stakes game of economic chess where the reward is huge.

Masterplan

As experts warn, tariffs are typically inflationary in the short term. So, how does this strategy make sense?

Demuth suggests that while tariffs might initially boost inflation, their large-scale implementation will eventually trigger a recession.

This recession would lead to lower inflation expectations and reduced demand for capital, ultimately driving down yields.

It’s a gamble, really, a recession strategy to refinance trillions at a lower cost and then revive the economy with stimulus packages.

Criticism

Critics, like billionaire Ray Dalio, warn that these tariffs could lead to global stagflation and alter U.S.-China trade relations significantly.

But Demuth draws parallels to the past, when quantitative easing and low interest rates fueled a risk-on rally.

We’ve seen this movie before, he says. Yet, until this refinancing cycle is complete, the market will remain tight, impacting risk assets like tech and crypto.

So, the next time someone says Trump is starting a trade war, remember, it might just be a yield war.

Pay attention to that 10-Year Treasury Yield Curve, because it holds the key to understanding this economic strategy. But let’s be real, guys, this is a high-risk game.

Have you read it yet? PayPal announced that Solana and Chainlink join the party

Disclosure:This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Kriptoworld.com accepts no liability for any errors in the articles or for any financial loss resulting from incorrect information.

LATEST POSTS

Tether now calling shots at Juventus?

The heavyweight champ of stablecoins, just upped its game in Italy, big time. We’re talking about Juventus, the crown jewel of Serie A, a club...

Ubisoft + blockchain = Might&Magic goes crypto

There will be a Might&Magic crypto card game. Ubisoft, the same crew behind Assassin’s Creed, Just Dance, all those blockbusters just made another move that’s...

Bitcoin’s back, baby, but is this the real deal or just another tease?

Bitcoin struts back onto the scene, trading above $93,000 like it owns the joint. The market’s buzzing, the big shots are buying, and everyone’s whispering,...

North Korean hackers pull off Hollywood-style crypto heist

Let’s say you’re a crypto developer, minding your own business, looking for your next gig. You see a job post from a legit-sounding company, like...

Most Popular

Guest posts