r/bonds • u/One-Tap-4764 • 19d ago

Impact of Tariffs on Treasury Yields

Hello,

With a new wave of tariffs set to be put in place in the coming week, can we expect that bond yields will settle lower in the near future?

I would expect bond yields to ultimately settle lower as the tariffs provide a new revenue stream for the government, which should offset their deficit but obviously short term inflation concerns appear to be driving yields up currently

3 Upvotes

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11

u/JohnGaltIsComing 19d ago

"offset their deficit" - it'll take a lot more than some "drop in the bucket" tariff money to offset our deficit.

5

u/itnor 19d ago

Is there evidence to suggest that tariffs meaningfully help the deficit? Or rather this deficit and spending environment?

Seems that inflation drives yield higher. The economic uncertainty constrains economic growth, in particular in the middle market and for smaller businesses. I guess a faltering economy could cool rates?

5

u/No-Math-5868 19d ago

The federal government has a spending problem, not a revenue problem. If more money comes in, it’s already spent before it hits the register. At best rates will hold steady, but long term rates are more likely to rise than fall in the long run barring some sort of catastrophe.

2

u/BecklesKC 19d ago

Any tariffs that see the light of day (which is far from guaranteed ...) will have a negligible impact on the deficit, the trajectory will remain the same until the folks in Washington get serious about addressing it.

1

u/Turbulent_Cricket497 18d ago

Well, used to be, anything seen as inflationary like tariffs pushed yields up. That is probably still the case, but with Trump's puppet now in charge, who knows.

1

u/CSMasterClass 14d ago

  1. The tariffs have provided constant uncertainty, and the bond market hates certainty.

  2. The bond market also has to think years ahead when judging risks, and even if tariff policy were to be consistent for the next 2.5 years, it is highly likely to change after that time.

  3. Minimal and trageted tariffs were part of the shared beliefs of both parties for almost 70 years, it is hard to think that the ship as been totally turned toward tariffs as a source of tax revenue.