After the United States canceled high tariffs on China, government bonds continued to experience a big dump.

In April, Trump launched a global trade war, announcing an exorbitant 145% tariff on China, which triggered two rounds of simultaneous declines in U.S. stocks, bonds, and currency that month, causing U.S. bond yields to soar and forcing Trump to back down.
Because the scale of US debt that needs to be rolled over by 2025 is about 7-8 trillion USD, most of which is concentrated in June, and the previous US debt interest rates were extremely low. Once replaced with high-interest bonds, it will lead to a huge increase in US interest expenditure.
On May 12, Trump and China signed a "Joint Statement," mutually canceling the previously imposed high tariffs, as they had become laughable tariffs; either trade would be severed, or the entire burden would fall on the United States.
The signing of the "Joint Statement" has restored operations at U.S. ports and allowed American businesses to escape the situation of having sold out all their inventory, but it did not save the U.S. national debt interest rates.
The logic behind the U.S. Treasury yield skyrocketing twice in April is that if the U.S. significantly raises tariffs, the quantity of goods purchased from China and around the world will greatly decrease, which will lead to a substantial increase in U.S. prices. In order to suppress prices, the Federal Reserve must stop lowering interest rates and even raise them; otherwise, U.S. prices will experience a big dump to an outrageous extent.
This logic has no issues at all, but after the signing of the "Joint Statement", China's goods began to be shipped in large quantities to the United States, yet the interest rates on U.S. Treasury bonds did not decrease at all; on the contrary, they continued to rise, with even consecutive big dumps.
On May 19, today, the yield on the 30-year U.S. Treasury bond surpassed 5%, soaring 2.21% in a single day, reaching a new high since the U.S. rate cuts in 2023, essentially returning to the data before the significant rate cuts in the U.S., which means that all the rate cuts made by the Federal Reserve last year have been in vain.
Don't think that seeing a "big dump" is a good thing, because this is a bond, not a stock.
The surge in U.S. Treasury yields indicates that the funds in the market do not recognize U.S. Treasuries; fewer people are buying them, which means they can only attract investors with higher yields. The only way to increase yields is through a decline in bond prices.
The US national debt is always fixed in face value and fixed in interest rate. A yield surge of 2.21% does not mean that the US bonds you just bought yesterday have made 2.21% today, but rather that the price of the bonds has plummeted today. If someone is willing to buy bonds today and hold them until maturity, their yield will be 2.21% higher than yours, which means you, who just bought US bonds yesterday, have suffered a significant loss. If you were highly leveraged, you could feel like jumping off a building overnight (US bonds usually have very small fluctuations, so hundreds of times leverage is allowed).
The big dump in government bond yields means the collapse of government bond prices, which usually leads to many financial institutions triggering margin calls on loans secured by government bonds, thereby causing a liquidity crisis, which may in turn trigger a financial crisis.
Moreover, the big dump in treasury yields will force the U.S. to borrow a large amount of new treasury bonds this year at a super high interest rate, which will significantly increase the financial burden on the federal government.
If the financial market is full of U.S. Treasury bonds with a yield of up to 5%, you can buy them anytime, and as soon as you buy, you can lock in this interest rate for a full 30 years.
In that case, it is certain that your government bonds with a 4% nominal yield will not sell.
They are all U.S. Treasury bonds, with the same credit rating. No one is willing to buy the high-yield foreign bonds, so definitely no one will want to buy these low-yield bonds.
Moreover, the most frightening thing is that this is the yield on 30-year government bonds, with the market value reaching as high as 5%.
In other words, the U.S. capital markets believe that it will be difficult to have a low-interest environment in the U.S. over the next 30 years and do not foresee the U.S. lowering interest rates. After considering all possibilities of future rate hikes and cuts, the U.S. market believes that a 5% yield must be offered today for anyone to be willing to lend money for 30 years. Otherwise, they would prefer to borrow short-term at 4.5%, as they can surely borrow at a higher rate when it matures.
This judgment is quite frightening, indicating that the high interest rates in the United States are likely to persist for a long time, and that it may take many years before we can return to a low interest environment.
As is well known, a country will only maintain high interest rates in three types of environments.
The first type is skyrocketing prices with inflation soaring; once the inflation rate exceeds 5%, interest rates must be raised to suppress it, otherwise, it can easily trigger hyperinflation.
The second type is a rapid depreciation of currency. For a currency that depreciates by 20% annually, even with an interest rate of 20% each year, it is still not attractive. At this point, the national debt interest rate must start at a minimum of 20%. Of course, for such countries, there must also be hyperinflation, as their prices are guaranteed to start with a minimum increase of 20%.
The last type is the rarest, where the economy of the country is extremely strong to the point of overheating, with projects everywhere offering high investment returns. No matter what you invest in, there are super high profits, and at this time, if your bond interest rate is set too low, no one will want it. Once you raise funds, anything you invest in can make you rich, so there will also be a high interest rate at this time.
For a country that is not troubled by inflation, has not experienced significant currency devaluation, and whose economic development is normal in every aspect, it is certainly possible to cut interest rates, as lowering interest rates will promote rapid economic development. For a deflationary country, they would wish to lower interest rates to zero.
Therefore, different countries have completely different interest rate policies, which may even be completely opposite, although all countries hope to stimulate economic development.
Now, the U.S. capital markets believe that the interest rate for the U.S. 30-year Treasury bond should be a high rate of 5%.
Either the U.S. capital market believes that the U.S. economy will surely take off in the next 30 years, and that investing in anything will easily yield over 8% high returns, or the U.S. capital market believes that the U.S. will be long-term trapped in high inflation and currency devaluation for the next 30 years, becoming an economy similar to Turkey, resulting in persistently high interest rates.
These are macro analyses, and even setting these aside, today is May 19th, and at this time, the interest rate on the 30-year U.S. Treasury bond has exceeded 5%. Therefore, the Treasury bonds issued by Trump in June are destined to be high-yield.
The national debt of the United States has already reached an astronomical figure, exceeding 36.2 trillion dollars by 2024, which means that the average American has borrowed as much as 107,000 dollars in national debt.
But because of the low interest rates in the United States, the interest expenses borne by the federal government are not high; in 2020, it only paid 338 billion dollars in interest for the whole year.
If all these low-interest government bonds are replaced with high-interest government bonds, let's assume an average interest rate of 4%. For a base of 36.2 trillion dollars, the interest that the United States will bear each year will become 1.44 trillion dollars, which has surged by 1 trillion dollars compared to 2020.
Moreover, this is purely interest expenditure, which disappears out of thin air, will not increase any benefits for the American people, nor will it create any infrastructure, and cannot even provide a shred of national defense security.
1 trillion dollars of additional spending sounds like an astronomical figure, and in fact, it is an astronomical figure, even for the United States.
In 2024, the fiscal revenue of the U.S. federal government is $4.92 trillion,
In 2024, the United States is recognized as a militaristic nation, with a terrifying military expenditure equivalent to the sum of the military budgets of the world's top 2 to 20 countries, which is 997 billion dollars, not yet reaching 1 trillion.
Today, the U.S. federal government will have an additional trillion in the interest column compared to its 2020 fiscal balance sheet.
It is obvious that this is the rhythm of fiscal bankruptcy; otherwise, the fiscal expenditures that need to be cut would be equivalent to the entire U.S. military budget.
As soon as Trump took office, he tried to cut spending, but he couldn't make cuts, he didn't dare touch military spending, he was reluctant to raise domestic taxes, and even his campaign platform was about lowering domestic taxes, so he could only think of tariffs, hoping to increase revenue through tariffs.
However, increasing tariff revenue leads to rising prices in the United States, which causes interest rates in the United States to remain high, forcing Trump to borrow new national debt at very high interest rates, resulting in a sharp increase in interest expenses for the U.S. federal government, with interest expenses exceeding the revenue from tariffs.
Trump doesn't want to pay so much interest, but there's nothing he can do; he has no other choice.
To lower the national debt interest rate, it is only possible to lower the average social interest rate. To achieve this, prices must be suppressed; only a society with low inflation can lower interest rates. Otherwise, once hyperinflation occurs, the entire society will collapse.
For China, this is a good thing for the tariff war we are currently engaged in, the higher the US debt interest rates, the better.
The tariff war between China and the United States has not ended; the joint statement on May 12 merely announced the end of the previously joking-level tariff war initiated by Trump, but the real China-U.S. tariff war has not concluded.
The tariffs that the United States currently charges China are 30%, and there is also 24% that has not been announced for cancellation, only a 90-day freeze has been announced, and they will discuss it again when the time is up.
As long as China shows any signs of weakness, the United States will immediately announce the reinstatement of this 24%, and any hesitation would not be worthy of being called America.
If China continues to hold the initiative and makes it increasingly difficult for the United States, not only will this 24% be permanently frozen indefinitely, but the current 30% will also decrease on its own.
The United States is only pursuing the maximization of its own interests. Although the means may be somewhat despicable, it is still limited to the pursuit of maximizing its own interests.
If the benefits of lowering tariffs far outweigh the benefits of raising tariffs for the United States, then the U.S. will eventually lower tariffs. A typical extreme example is when Trump jokingly raised tariffs to 145%, only to ultimately have to lower them helplessly.
The United States has a much stronger capacity to withstand a 30% tariff, but the reaction of the US capital markets has already said it all; their voting results directly forecast the consequences that this 30% tariff will bring to the United States.
The disadvantages outweigh the advantages; the tariffs collected are not enough to cover the additional interest on national debt.
So the big dump in U.S. Treasury yields is good news for China, as it means we are taking the initiative in the current tariff war, while the U.S. is still plagued by high inflation.
Currently, the voting results from the U.S. market indicate that as long as you buy in, you can immediately lock in a 5% yield for a full 30-year treasury bond, yet no one wants it, and the price is still falling, causing the yield to have already surpassed 5%.
It is said that the U.S. capital market is the most acute, and it is said that U.S. funds are the smartest.
What do they expect the high inflation and currency depreciation in the U.S. to last for over the next 30 years to give such absurd interest rate results.
The opinion circles in the United States have coined a new term for this outrageous trading result, called "Sell America" trading.
I have to say, those media people in the U.S. who manipulate public opinion are really powerful, and this new term is quite accurate and fitting.