US President Donald Trump’s thinly veiled threat to hold a gun to the heads of countries that refuse to maintain or expand their holdings of US Treasury bonds would be absurd coming from anyone other than the highly erratic US president. Nevertheless, it must be taken seriously by markets.
Questioned about Treasury Secretary Scott Bessent’s recent efforts to support the US government bond markets through official buy-backs, Trump said that this tactic represents just one possible type of market intervention.
“We have many types of intervention. That’s one. The ultimate intervention is our military. And, uh, if we have to use that, we will,” he said.
Making these kinds of threats could set off a wave of selling US Treasuries among the ranks of US creditors around the world. In turn, this would destabilise global bond markets, as well as the markets for equities and other financial assets.
The US dollar is still the world’s primary reserve currency, albeit to an increasingly lesser extent as other potential candidates – the euro, yen and yuan – become more widely used. Most likely it will be a combination of all three currencies that reshapes the global landscape, seeing that Trump’s problem-riddled administration has exposed the folly of relying too heavily upon any single country or currency.
Trump’s behaviour is highway robbery on a grand scale. Even if the highwayman in question is possibly becoming less of a terrifying figure amid speculation of his willingness to step down in favour of US Vice-President J.D. Vance as difficult midterm elections loom for the Republicans. Even if Trump does step aside, though, his administration’s policies – and not just the economic and financial ones – will live on in his absence.
