Trump U-turn after bond market chaos: US President caves in to pressure as he announces 90-day pause on tariffs

Donald Trump last night caved in to bond market pressure as he announced a 90-day pause on huge import tariffs.

It came after US bond yields soared, sparking similar sell-offs across the globe. In the UK, 30-year borrowing costs hit their highest level in 27 years.

Paul Ashworth, chief North America economist at Capital Economics, said: ‘Although President Trump was able to resist the stock market sell-off, once the bond market began to weaken, it was only a matter of time before he folded on eye-wateringly high tariffs.’

Trump’s U-turn sent Wall Street stocks surging, with the Dow Jones up 7.9 per cent, the S&P 500 rising 9.5 per cent and tech-focused Nasdaq climbing 12.2 per cent.

But the move came too late for markets in the UK and Europe, with London’s FTSE 100 ending 2.9 per cent lower, France’s Cac 40 down by 3.3 per cent, and Germany’s Dax off by 3 per cent.

Those markets look likely to enjoy a rebound today. Elsewhere, oil prices fell with Brent crude below $60 a barrel for the first time in more than four years – before rebounding on Trump’s announcement.

Yet uncertainty remained over Trump’s next move – and he will notably not spare China, the world’s second-biggest economy – instead ramping up tariffs to an extraordinary 125 per cent.

Yesterday’s carnage was led by the US, where 30-year borrowing costs passed 5 per cent, their highest since November 2023.

Trump’s partial U-turn last night sent them lower, but they were still trading above 4.8pc, notably higher than when he launched his tariffs last week.

UK 30-year bond yields rose above 5.6 per cent to their highest since 1998. They were still over 5.5 per cent after the volte-face.

The moves drove speculation that the US Federal Reserve may have to intervene with an emergency interest rate cut.

And, for analysts at US bank Morgan Stanley, the UK’s fragile economy added to the case for the Bank of England to step up rate cuts.

It told clients: ‘What worries us is the weak starting point of the UK economy. UK businesses have communicated to the BoE that they will be looking to trim headcount if activity does not pick up.’

Marcus Brookes, investment officer at Quilter Investors, said: ‘Trump is gaining a reputation now for flip-flopping on tariffs and not having a consistent economic policy. 

Even with this latest announcement, we still have the uncertainty from the fact this is just a 90-day pause.

‘Trump has likely stepped in before he would have had his hand forced by the Fed, a humiliation he clearly wants to avoid.’

Tariff announcements have spurred markets to ramp up bets on rate cuts in the US and Britain. Traders are betting on three to four more quarter-percentage point cuts by the BoE this year.