CEO of Bitpanda: Trump's Tariffs Are 'A War of Interests', Not Protectionism

Eric Demuth, CEO of Bitpanda, argues that Trump's tariffs are primarily a strategy to lower the yield on the 10-year Treasury bonds and facilitate the refinancing of the 9 trillion dollar debt of the United States by 2026. Demuth: Trump's Tariffs Are Not Protectionist Eric Demuth, the CEO of the cryptocurrency exchange Bitpanda, argues that President Trump's tariff policy is not as related to protectionism or geopolitics as many critics assert, but is more about managing the massive debt refinancing of the U.S. government. In a recent post on LinkedIn, Demuth asserted that the real motive behind the tariffs is to deliberately slow down the U.S. economy, thereby reducing the yield on the 10-year Treasury bond. Lowering this yield, which is currently hovering around 4.20%, is crucial for the U.S. government, which has to roll over $9 trillion in maturing Treasury bonds by the end of 2026. "That interest rate is an important number," Demuth said. "Every basis point cut means saving billions of dollars in interest over the next decade." Demuth believes that the only effective way to lower this yield is to create an economic recession. While tariffs are often seen as inflationary in the short term, he believes that widespread implementation will ultimately lead to a recession, resulting in lower inflation expectations and reduced capital demand, thereby lowering yields. "What may seem like protectionism could actually be a strategy for recession," Demuth argued. "The U.S. government is facing a wave of large recapitalization." According to Bitcoin.com News, many critics argue that Trump's "reciprocal" tariffs are inflationary and will push the United States into recession. Billionaire Ray Dalio stated that tariffs could lead to global stagflation and significantly alter U.S.-China trade relations. In a comment after the Trump administration's reciprocal tariff regime began, Dalio seemed to agree with Trump's belief that this move would funnel more revenue into the government treasury. However, according to Demuth, the strategy of contraction is aimed at suppressing yields right now, refinancing trillions at a lower cost, and then shifting to a stimulus mode to revive the economy. He compares it to the period of 2020-2021, when quantitative easing and near-zero interest rates drove a risk price surge. "We have seen this movie before," Demuth wrote. "It will not happen again until this refinancing cycle is complete—and until the 10-year bond yield is under control." Trump's Interest Rate War Many economists consider the yield on 10-year Treasury bonds to be a benchmark for various interest rates, including mortgage rates, corporate bonds, and other loans. Changes in this yield significantly affect borrowing costs across the economy. It is also seen as an indicator of investor sentiment regarding the future health of the economy, with rising yields signaling expectations of stronger economic growth and inflation. However, some economists express concern about the impact of government debt and fiscal policy on 10-year bond yields. According to these economists, the large government deficit, similar to the deficit inherited by the Trump administration, could put upward pressure on yields. Demuth warns that until this refinancing process is completed, the market will remain in a tight liquidity environment, affecting risk assets, particularly in the technology and cryptocurrency sectors. "So the next time someone says Trump is 'starting a trade war,' look at it differently," Demuth advised. "This is not a trade war. This is a yield war." He concluded by urging market followers to pay attention to the 10-year Treasury yield curve, stating that it plays an important role in understanding the current economic strategy. ⚠️IMPORTANT! If you like this topic, don't forget: • Follow me @blogtienso for more interesting content! • Like, share, and leave a comment 💖 and don't forget to DYOR! #Write2Earn #Write&Earn $BTC {spot}(BTCUSDT)