The best-case scenario
Although the worst-case scenario may be unlikely, that’s also true of the best-case scenario for Trump.
A rapid rollout of bilateral trade deals could assuage the looming tariff deadline concerns, bringing broader certainty on trade. Continued positive vibes on the Trump administration’s China talks could also assuage markets.
Meanwhile, if tariff revenues continue to tick up from tariffs that are in place, that could alleviate some concerns that the passage of the Big, Beautiful Bill would add too much to the deficit. The bill also has the added benefit of removing a massive near-term risk – the debt ceiling – off the table, enabling America to make good on its debt obligations.
Businesses could grow more certain about the economy from the passage of the tax cut bill and more trade deals, both of which would be viewed as pro-growth and pro-business. That could reignite corporate investment and restore faith in America’s economy.
If, then, spending talks in September somehow lead to bipartisan support for sharply reduced spending, then perhaps Trump’s promise of a new economic Golden Age is possible, after all.
Of course, the problem with that scenario is it requires a lot of things to go right all at the same time – and therein lies the biggest, yet least-understood risk Trump faces: Everything in his plan is connected to everything else. At its conception, his economic agenda was a high wire act with not net – one that mainstream economists from both parties largely found completely implausible.
Trump and his administration have already made their lives dramatically more complicated with the chaotic rollout of their trade policy. And the tax bill is far less pro-growth than they would’ve ideally had, as the bill makes the biggest corporate incentives temporary while backloading all the biggest cuts and fiscal restraint.
Getting ‘yippy’
For all the ways Trump and his advisors have bulldozed and bent to its will seemingly every obstacle and opponent in its path the last few months, those same White House officials are keenly, if quietly, aware that the bond market may be the most uniquely immune actor to Trump’s executive authority – no matter how expansive he views its reach.
That’s not based on speculation. It’s based on Trump’s own actions last month when CNN reported palpable concern about investor discomfort with US debt – or, in Trump’s words a bond market that was “getting yippy” – sparked a dramatic pullback in the tariff policy that had rattled the global financial system.
Trump has since been dismissive of the bond market’s role in his decision and Treasury Secretary Scott Bessent has claimed, however tenuously, that the 90-day pause on the administration’s draconian “reciprocal” tariff rates was all part of the plan.
Bessent, in an off-the-cuff quip at a finance conference earlier this month, appeared to confirm what sources made clear was central factor in the decision.
“I’ve got this app on my phone that anytime the US government prices change by more than 2% in two hours, off my phone goes…” Michael Milken started to tell Bessent during a moderated conversation between the two in Los Angeles.
“Please don’t share that with the president,” Bessent, cutting Milken off, quipped to widespread laughter from the audience.
The decision to reverse course on “Liberation Day” tariffs, at least temporarily, settled the bond markets and has driven a rally in the stock market that has equities at a higher point than they were before the tariffs were announced. But the Moody’s downgrade and the market suddenly grasping the roughly $4 trillion debt load Trump’s tax cuts and spending bill would pile on has brought the April anxiety back to the forefront.
The news of weak demand at a Wednesday afternoon bond auction accelerated that unease in a dramatic fashion. It also brought back to mind the particularly handy reflection dished out by a top White House official more than three decades ago.
“I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 baseball hitter,” the eminently quotable Democratic political operative James Carville said after President Bill Clinton’s White House was singed by investors. “But now I would want to come back as the bond market. You can intimidate everybody.”