PULSE POINTS:

What Happened: President Trump imposed a 10% blanket global tariff and additional reciprocal tariffs this week, aimed at reshaping both the U.S. and global economies—not just fixing trade deficits.

Who’s Involved: President Donald J. Trump, his economic team (including chief economic advisor Stephen Miran), and U.S. importers/exporters. Global trading partners are watching closely.

Key Quotes:

• Trump’s team believes “the bond market is a more significant economic problem at the moment than the volatility in the stock market.”

• Miran argues a weaker dollar would “reduce haven demand” and close the trade gap by decreasing overvaluation.

Fallout: The 10-Year Treasury Bond yield fell below 4% after the tariff announcement, suggesting markets see the move as deflationary in the long run. However, the U.S. dollar unexpectedly weakened, raising concerns about rising import prices and consumer inflation.

Economic Shift: The policy pushes toward restoring U.S. industry—steel, autos, manufacturing, and tech—by penalizing foreign-made goods and reducing reliance on market speculation and financial arbitrage.

Significance: If successful, this policy will:

• Reshore U.S. production jobs;

• Encourage foreign direct investment into real industry;

• Lower long-term interest rates to reduce debt costs;

• Shift the economy from financial engineering back to tangible production;

• Realign the value of the U.S. dollar to support exports.

Buried Lede: Trump’s true economic revolution isn’t just tariffs—it’s a bid to de-financialize the U.S. economy, cut Wall Street’s grip, and refocus on real industrial growth. The bond market, not the trade deficit, may be the real target.

IN FULL:

President Donald J. Trump’s imposition earlier this week of a 10 percent blanket global tariff and additional reciprocal tariffs appears intended to achieve far larger and more complex changes to the international and domestic American economies than simply ending foreign trade imbalances.

Trump’s economic team has subtly suggested the impact of the import duties could extend to increasing foreign direct investment in American industries, incentivize a shift in economic investment away from market speculation and into industries focused on producing tangible value, and put downward pressure on interest rates by lowering the 10-Year Treasury Bond yield.

The myriad economic objectives the Trump White House hopes to achieve through its tariff policy are ambitious, to say the least. However, if the policy succeeds, President Trump will have fundamentally moved the United States into a position to dominate the global economy for the foreseeable future.

IT’S ALL ABOUT TREASURY BONDS? 

One of the more important secondary policy goals that the Trump White House likely hopes to achieve is a reduction in the 10-year Treasury Bond yield. While most people focus on the Federal Reserve Bank and its interest rate policy, the yield of long-term government bonds impacts interest rates on types of debt held for longer durations, including mortgages, credit cards, and, most importantly, government debt.

The tariffs are anticipated to push the 10-Year Treasury Bond yield lower, meaning the cost of the federal government’s payments servicing the national debt will be reduced. Notably, the inflationary cycle that set in under the Biden government—and was exacerbated by former President Joe Biden’s reckless spending policies—caused the cost to service the debt to increase dramatically and made it difficult for the government to take on any new debt.

Trump’s economic team appears to believe that the bond market is a more significant economic problem at the moment than the volatility in the stock market being generated by the new tariff policy. This assumption is likely correct, and already, the 10-Year Treasury Bond yield rate has fallen below the key four percent benchmark following Trump’s imposition of tariffs on April 2.

If the rate can be held below four percent for the foreseeable future, the lower cost of long-term debt should have significant positive impacts on the U.S. economy.

PRODUCTION OVER ARBITRAGE. 

Another policy goal the Trump White House likely hopes to achieve with the tariffs is a shift away from America’s financialized economy, which focuses on maximizing shareholder value and market speculation, toward an economy more focused on producing tangible value. Tariffs are often used to protect and grow strategically important domestic industries, such as shipbuilding and steelmaking, though the aggressive trade policy announced by President Trump appears intended to have a far more significant and transformative effect than simply protecting certain companies from foreign competition.

Over the last several decades, the American economy has become overly focused on shareholder interests, resulting in companies prioritizing profit maximization to increase investor dividends. This change encouraged large-scale outsourcing of jobs from the United States to foreign countries with either weak currencies or generous state subsidies, drastically reducing labor and production costs. The shift away from production resulted in many American businesses deriving most of their profits through arbitrage rather than producing products themselves.

Companies engaging in arbitrage essentially contract production out to foreign firms and then import the product to the United States for sale in the domestic market. In essence, these businesses are, at best, glorified importers. At worst, arbitrage-focused companies actively aid foreign trade schemes intended to crash domestic prices for certain products and kill off domestic American competitors.

Trump’s tariffs will increase the cost of importing goods to the United States, which will not only incentivize companies to locate in the U.S. to avoid the import duties but also make it less profitable for companies to derive profit through arbitrage.

A WORKER’S ECONOMY. 

While President Trump has focused chiefly on tariffs as a tool to reduce America’s trade deficit with foreign nations, he has indicated that reshoring jobs and rebuilding the United States’s steel, manufacturing, automobile, and technology industries are other goals. The White House has pitched the secondary effects of the tariffs as the rebirth of American industry and an economy focused on rewarding American workers.

Throughout history, tariffs have been used to protect and grow domestic industries and prevent predation by foreign nations engaging in manipulative trade practices like currency manipulation, product dumping, and state subsidization. The Trump administration argues that the 10 percent blanket global tariff will incentivize companies that have moved most of their production overseas to relocate back to the United States to avoid paying import duties and maintain their market share.

Additionally, the tariffs should boost foreign direct investment in the United States. This will boost domestic investment in American companies through increased foreign capital flows into the United States. While it is too early to determine whether the tariffs will have the desired effect of reshoring and rebuilding key industries and increasing foreign investment, the policies being implemented by President Trump are certainly tailored toward this goal.

THE DOLLAR PROBLEM. 

While early signals suggest the Trump tariffs will prove ultimately successful, one significant problem could cause a period of price and market volatility that the White House had hoped to avoid. In theory, the tariffs imposed by President Trump should have strengthened the value of the U.S. dollar. In fact, Trump’s economic team anticipated this effect and argued that, in the short term, a strong dollar would help blunt the increased cost of imports.

However, against expectations, the U.S. dollar weakened in the immediate days after Trump announced the new tariffs. While the dollar did see a rally on Friday, if its value were to begin eroding again, the possibility of negative domestic impacts caused by higher prices on foreign goods would not likely be avoidable.

Conversely, after the tariff effects have subsided in the long term, the Trump White House economic team is likely to pursue policies aimed at weakening the dollar’s value to reduce America’s trade deficit. According to a theory proposed by President Trump’s chief economic advisor, Stephen Miran, weakening the dollar will discourage foreign governments through their central banks from moving assets into the United States. Miran argues this would reduce haven demand, where foreign governments move assets into stable economies to avoid domestic volatility. He contends this causes the dollar to be overvalued and subsequently increases America’s trade deficit.

President Trump ran on a platform pledging to transform the United States economy and put American workers first. The tariffs announced on April 2 are a significant step in fulfilling that promise, though the road to achieving an America-First economy still has many obstacles ahead.

The post Trump’s Tariffs Are About a LOT More Than Just Reducing the Trade Deficit. appeared first on The National Pulse.