US Tariffs and Bond Market Reaction

President Donald Trump was forced to pause his tariffs campaign due to pressure from the bond markets. Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick highlighted a potential market meltdown. Trump's insights were influenced by those who understand financial markets, especially considering his background in real estate.

Understanding Bond Market Influence

• The bond market's influence was evident when yields on 10-year Treasuries rose from 3.9% to 4.5% within days.
• Governments often heed the bond market, as evidenced by Liz Truss’s short tenure as British Prime Minister.

Consumer Neglect in Trade Policy

Consumers are often overlooked in trade policies, with a focus on producers and special interests. This neglect results in imbalanced policies that can have long-term consequences.

• In China, consumer interests are often bypassed for industrial growth, with policies favoring manufacturers.
• In India, trade agreements often prioritize producers over consumer benefits, such as stable prices and greater product variety.

Impact of Tariffs on Consumers

Trump's tariff policies suggest a significant burden on US consumers, contradicting claims that foreign producers would bear the cost. The elasticity of demand affects who ultimately pays this import tax.

• Two consequences of taxes include inefficiency and redistributive effects, typically moving resources from private to government sectors.
• Trump's tariffs proposed a transfer from US consumers to its producers, although consumers often lack organized representation.

Consumer Voice and Policy Making

Consumers, though the largest interest group, are often the least influential. Sharp increases in prices of staples and luxuries might have engaged this group more effectively.

• Despite potential consumer benefits from trade agreements, their voices remain marginalized both in the US and India.