The similarities between former President Trump and Liz Truss, the shortest-serving British Prime Minister, are becoming more apparent. Truss's tenure was marked by significant market instability in 2022. This was triggered by her proposal for substantial tax cuts, which she planned to finance through extensive government borrowing. Ultimately, concerns about a potential credit crisis, fueled by a surge in yields on British government bonds, led to her downfall.

Currently, there's a noticeable increase in yields on U.S. Treasuries. Following the implementation of Trump's recent tariffs, including substantial levies on China, the yield on the 10-year U.S. Treasury climbed to 4.5 percent, a rise from approximately 3.9 percent just days prior. The yield on a 30-year bond briefly exceeded 5 percent.

While current yields are still lower than when Trump took office, a continued sell-off of Treasuries could eliminate the key distinction between the global market's reaction to Trump's tariffs and Truss's tax cuts. Initially, after the announcement of the tariffs, bond yields actually decreased, even as the stock market declined and the dollar weakened. This was partly due to expectations of slower economic growth, but also highlighted the traditional role of the American bond market as a safe haven for investors.

However, some analysts suggest that this safe-haven status may be eroding. In a worst-case scenario, this could force the Federal Reserve to intervene, mirroring the Bank of England's actions in 2022 to stabilize the British bond market.