U.S. Treasury Yields Drop as Trump’s Tariff Threats Spark ‘Sell America’ Wave

Yields Decline Amid Trade War Fears

U.S. Treasury yields fell across the curve on Friday, May 23, 2025, with the 10-year note yield slipping two basis points to 4.509%. The decline was triggered by President Donald Trump’s escalating tariff threats, including a proposed 25% tariff on iPhones not manufactured in the U.S. and a 50% tariff on European Union imports starting June 1. These protectionist measures intensified concerns over a deepening trade war, fueling a “Sell America” trend that saw investors pull back from U.S. equities, bonds, and the dollar.

Trump’s Policies Rattle Markets

Trump’s targeting of Apple, a major U.S. company, added pressure on equity markets, with indices facing strain as Wall Street’s close approached. The threat of tariffs on iPhones produced abroad was coupled with heightened tensions with the EU, where Trump criticized stalled trade negotiations. The U.S. Dollar Index (DXY) weakened, reflecting broader market unease. Additionally, Moody’s downgrade of U.S. government debt from AAA to AA1, citing worsening fiscal prospects and persistent inflationary pressures from tariffs, further eroded confidence in U.S. assets.

Fiscal Concerns Mount with New Tax Bill

The U.S. House of Representatives approved a tax bill projected to add $3.8 trillion to the national debt, which now awaits Senate review. This development, combined with the 30-year Treasury bond yield climbing above 5%, underscored growing anxieties about the U.S.’s fiscal trajectory. The bill’s passage amplified fears of sustained inflation and fiscal deterioration, contributing to the retreat in bond yields as investors reassessed risk.

Market Outlook Amid Uncertainty

The combination of Trump’s tariff rhetoric, the debt-heavy tax bill, and Moody’s downgrade has heightened market volatility. Investors are increasingly wary of U.S. fiscal stability and the inflationary impact of trade barriers, prompting a shift away from U.S. assets. As trade tensions and fiscal challenges dominate, Treasury yields are likely to remain sensitive to further policy developments and upcoming economic data.