You really couldn’t make it up.
Just months ago, Vice President J.D. Vance – then a senatorial Cassandra – sat down with Tucker Carlson to warn the world of a looming “bond-market death spiral.”
“I really worry about the bond markets. Do the international investors, the people who are getting rich off globalization, the people who have gotten rich from shipping our manufacturing base to China, the people who have gotten rich from a lot of wars — do they try to take down the Trump presidency by spiking bond rates?” Vance told Carlson.
The scenario he described was dire: interest rates rising so rapidly that debt service would crowd out everything else – infrastructure, defence, even Social Security.
At the time, he suggested Wall Street might be behind such an assault, out to sabotage a second Trump presidency.
Well, Mr. Vice President, congratulations: the spiral has arrived. But it didn’t come from the shadows of globalist boardrooms or the bowels of Davos.
It came from exactly where everyone with a basic grasp of macroeconomics said it would — the Resolute Desk.
Liberation Day… From Market Confidence
On April 2, 2025, Donald Trum at the White House, declared “Liberation Day.” With a flourish befitting an empire in decline, he imposed a 10% universal tariff on all imports, rising to as much as 145% on goods from China. This was not a policy tweak. It was a policy grenade.
Within hours, the global financial system reacted — not because it “hates Trump” or wishes to undermine American sovereignty, but because it functions on trust, rules, and predictability. And Trump had just dynamited all three.
Global equities tanked. Wall Street suffered one of its sharpest drops in over a decade. But more tellingly — and more dangerously — U.S. Treasury yields has surged.
And the dollar? Instead of rallying as it usually does in a crisis, it fell. Investors, for the first time in living memory, were bailing on both the greenback and U.S. debt simultaneously.
This is not a normal market correction. This is a crisis of credibility.
Markets Aren’t Political. They’re Rational.
Vance’s original “death spiral” concern was that the bond market might be used as a political weapon against Trump.
But this reflects a fundamental misunderstanding of how markets operate.
Markets aren’t partisan. They don’t care about your slogans or rallies. They care about risk. And what Trump has introduced — with Vance cheering him on — is unprecedented policy risk.
Trump’s tariff barrage has not only upended trade flows; it has also jeopardised the foundational belief that U.S. institutions are stable, policy is predictable, and debts will be honoured under a rules-based system.
When you threaten to default “as a negotiating tactic,” when you undermine the Fed, when you launch economic nationalism at full throttle, markets take notice. And they raise bond yields accordingly.
To be clear: this is not the bond market punishing Trump. This is the bond market pricing him in.
A Trussonomics Encore, but Bigger and Louder
Vance drew a parallel with Liz Truss — the UK Prime Minister whose tenure was shorter than a head of lettuce. It’s an apt comparison, but not quite in the way he meant.
Like Truss, the Trump-Vance administration announced sweeping fiscal policies with no credible framework for institutional support. Like Truss, they blindsided markets. And like Truss, they watched in real time as yields exploded and confidence evaporated.
The key difference? Britain has a smaller economy and a flexible, politically independent central bank. It also has the IMF, the EU, and institutional partners ready to step in.
The US has none of these luxuries when the credibility of its leadership collapses. What it has is the world’s reserve currency — and now even that is starting to look less like an anchor and more like a liability.
The Spiral in Motion
Let’s revisit the mechanics of the spiral, not in theory, but now in practice:
- Tariffs trigger market uncertainty.
- Bond yields rise sharply as investors demand a premium for holding U.S. debt.
- The dollar falls, as confidence in U.S. institutions wanes.
- Debt servicing costs explode, making fiscal management nearly impossible.
- Further policy responses (like more tariffs or capital controls) exacerbate the panic.
And just like that, the United States — the issuer of the safest asset in the world — begins to look, act, and smell like an emerging market in crisis.
Even the temporary suspension of some tariffs has done little to soothe markets. Investors, once burned, are not easily coaxed back. The trust deficit is growing faster than the fiscal one.
Vance’s Prophecy Fulfilled — By His Own Administration
The greatest irony is that Vance was right — just not in the way he hoped.
The “death spiral” is here, but it wasn’t orchestrated by Wall Street. It was summoned into being by the reckless, chaotic, and deeply unserious governance of the very administration he now serves.
In February, I warned on this blog that if trust in U.S. governance breaks, interest rates will explode.
I called it “The Trump Superspike.” And now, here we are.
Yields are soaring. The dollar is sliding. Risk premiums are rising. The world is beginning to price in the possibility that the United States is not a safe place to park capital.
And that’s what a real “death spiral” looks like.
The End of the Illusion
For years, populist-nationalists like Trump and Vance have promised that they could tear down the old order and build something new — stronger, more independent, more free.
But they forgot that the scaffolding they’re destroying is the very system that gives the U.S. financial credibility. Take away the scaffolding, and all you’re left with is a façade.
You can bully NATO, fire Fed chairs, and raise tariffs until the cows come home. But you can’t bluff the bond market. You can’t impose your will on investors with press conferences and slogans.
Markets aren’t woke. They’re just sober. And right now, they are sober and fleeing.
If the Trump-Vance administration wants to avoid full-blown financial crisis, it will need to do something it’s shown little talent for: restore trust. That means real fiscal frameworks. That means independent institutions. That means talking less and instead respecting institutions, rules and norms – domestic and international.
Until then, the death spiral will continue. And J.D. Vance will have no one to blame but the man whose shadow he walks in — and himself.
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