Apocalyptic warning about economic meltdown that forced Trump’s hand on tariffs… NOT any ‘art of the deal’

President Donald Trump was forced to backtrack on his sweeping tariff plans because of a ‘fire sale’ in the bond market which could have triggered economic meltdown.  

Alongside causing turmoil in the stock market, Trump’s sweeping tariff plans sparked a major US government bonds sell-off, the likes of which had not been seen since the depths of the Covid-19 crisis. 

Experts are saying that it was this, rather than simply the ‘art of the deal,’ which caused the White House to backtrack on its tariff proposals. 

On Wednesday, the President announced a 90-day pause on all new ‘reciprocal’ tariffs, in a major reversal which caused one of the biggest stock market rallies in history. 

He did not spare China, however, instead slapping Beijing with yet another round of import taxes. 

Fox Business senior correspondent Charlie Gasparino said the bond market crash forced Trump to ‘capitulate’ on his plans.

Speaking on Fox Business, Gasparino said: ‘Let’s be clear what happened. Who capitulated here and why? I don’t want to say this because I am a patriot, I am an American, but it is the White House who capitulated based on everything I hear and all my sources.

‘And the reason why is because of the bond market. When you have yields on the 10-year rising to 5 percent, stuff starts shutting down. When you have the lending markets screwed up.’ 

The ‘fire sale’ in the bond market came to a head late on Tuesday and into Wednesday. 

The 10-year Treasury yield climbed overnight above 4.51 percent, while the 30-year Treasury yield hit a high of 5.02 percent on Tuesday night, CNBC reported.   

US government bonds have traditionally been seen as one of the world’s safest assets, and as a place where investors can put their money in times of volatility.

But the sudden fall was one of the clearest signs yet that investors may be beginning to lose confidence in their safe haven status – and an indication of just how much the world’s biggest economy was shaken by Trump’s tariff plans.

Gasparino claimed that, according to his sources, while Trump was negotiating with Japan, it was dumping US Treasury bonds ‘because they believed this was not a great place to do business.

‘That forced their hands,’ he said, referring to the White House. 

Economist Mohamed El-Erian, President of Queens’ College, Cambridge and Allianz chief economic adviser also blamed the bond market sell-off for Trump’s U-turn. 

‘Up to an hour ago, there was a debate on what would convince the US Administration to opt for some type of pause on tariffs,’ he wrote in a post on X at 2.30pm ET. 

‘Would it be Congress, the President’s advisors, business leaders, the legal system, markets, or something else? 

‘We got the answer today: It’s the government bond market–particularly, how close it gets to the line that separates wild price volatility from market malfunctioning.’

Later on Wednesday, the 10-year yield retreated from its highs after a successful bond auction which signaled solid demand. 

But yields remained elevated despite the temporary tariff pause, leaving Treasury investors bruised.

While the bond market may seem far removed for regular Americans, experts warn how it can have an impact on mortgage rates. 

A rise in Treasury yields, which move inversely to prices, means government borrowing costs will surge higher.

Rising borrowing costs tend to filter across and cause an increase in mortgage rates, which have previously been on a downward trajectory in recent weeks.

‘The spike in bond yields means mortgage rates have quickly unwound the decreases of the past few weeks and are moving back toward 7 percent,’ Greg McBride, chief financial analyst at Bankrate, told the Daily Mail on Wednesday.  

Danielle Hale, chief economist at Realtor.com, warned major moves in the bond market will likely hit consumers.

‘Perspectives will continue to change as the situation evolves, but for now, this has spilled over into mortgage backed securities meaning that consumers are likely to see higher mortgage rates and further volatility ahead,’ she said. 

Mortgage rates are closely linked to the yield on the 10-year US Treasury bond, though not directly tied.

When Treasury yields rise, mortgage rates typically go up as well – and when they fall, mortgage rates tend to drop.

This is because lenders use Treasury yields as a benchmark, adding a margin to cover risks and costs.

Mortgage rates had been decreasing in recent weeks, bringing hope for some relief for US homebuyers. 

Many Americans have stayed put in their homes in the last several years, ‘locked in’ by lower mortgage deals secured during the Covid-19 pandemic.

Many were resistant to move and be forced to make a higher monthly payment. 

But rates had appeared to be ticking down in the last several weeks. 

The average 30-year fixed-rate mortgage was 6.64 percent, as of latest Freddie Mac data from April 3. 

McBride, from Bankrate, said that while it looks like rates are heading back up closer to 7 percent, there may still be a possibility of securing a better deal.

‘More competitive rates exist, so be sure to shop around, but even they are on the rise too,’ he said.