The global economy is highly complex and integrated. A decision made in isolation can often have wide ranging and “unexpected” consequences.
The current trade and tariff war is just such an example. The US has for a long time trade deficits. These aren’t bad, they are not one country taking advantage of another.
As the US ran a trade deficit with a country such as China, the Chinese received an excess amount of US dollars. These dollars were then turned around and purchased US government bonds. This was the one the mechanisms that allowed the US Government to fund their budget deficits.
It was a wonderfully symbiotic relationship.
Now however it appears that the number of buyers for Treasury bonds is starting to decline. The recent 10 year treasury bid-cover ratio of 2.10 was one of the worst in some time.
This may or may not be a big deal but it does show that the 2nd and 3rd order effects of the trade war may be an unintended consequence that nobody has thought about.
Bye for now.