Currently, the US's escalating tariff policies and aggressive geopolitical strategies are continuously pushing up US Treasury yields and market interest rates, becoming a core factor impacting the US financial market and suppressing the real economy. US Treasury yields are the core pricing benchmark for the entire US economy; their continued rise directly increases corporate financing costs, household mortgage payments, and exacerbates government debt pressures, while also disrupting stock market trends, resulting in a comprehensive negative impact on the US economy.

US Treasury yields surged out of control, and the Treasury's rare two-pronged intervention had limited effect.

To curb runaway interest rates and stabilize financial markets, the U.S. Treasury Department has recently implemented several unusual intervention measures, but these have failed to reverse the overall upward trend in interest rates. In the past month, Treasury Secretary Scott Bessant implemented two highly controversial special market interventions, both aimed at curbing the rapid rise in long-term U.S. Treasury yields. In early August, the U.S. intervened in the currency market for the first time in over two decades, joining forces with Japan to purchase yen to help it appreciate. The last time such a measure was taken was during the 1998 Asian financial crisis. At the end of the month, Bessant announced a doubling of the scale of long-term Treasury bond repurchases to alleviate upward pressure on long-term interest rates by repurchasing existing bonds in the market. Despite these continued policy efforts, U.S. interest rates remain high, with the 30-year Treasury yield currently climbing to 5.3%, a new high since 2007. As early as February of this year, the U.S. government listed lowering Treasury yields as a core economic objective, demonstrating the severity of the current runaway interest rate situation, a key economic indicator that has completely escaped the scope of short-term policy adjustments.

Policy spillovers have triggered global repercussions, with tariffs becoming a key driver of inflation and rising interest rates.

This round of interest rate increases is not unique to the United States; yields on government bonds in developed economies worldwide are moving in tandem, which is a key reason for the US's cross-border intervention in the Japanese currency market. US policymakers are concerned that the vicious cycle of yen depreciation, rising Japanese inflation, and higher Japanese bond yields will be transmitted to the US bond market through the global financial system, further amplifying upward pressure on interest rates and market volatility. The core cause of this global interest rate turmoil stems from the Trump administration's foreign policy adjustments, with tariffs having the most significant negative impact. Since taking office, the US has pursued two major foreign economic strategies: imposing tariffs on a wide range of items and pressuring allies to increase defense spending as a percentage of GDP, directly fueling persistent imported inflation. According to calculations by the Yale Budget Lab, this round of tariffs has directly pushed up US consumer prices by 0.7%. With US inflation consistently exceeding the 2.0% policy target and failing to reach it for six consecutive years, tariff-driven inflation further forces US bond yields upward, raising overall financing costs and ultimately creating a negative cycle of "tariffs driving up inflation, inflation pushing up interest rates, and interest rates suppressing the economy." The current global interest rate hike is a widespread phenomenon, with yields on government bonds in developed economies highly correlated. This is a key reason for the US's cross-border intervention in the Japanese currency market. US policymakers are concerned that the vicious cycle of yen depreciation, rising Japanese inflation, and soaring Japanese government bond yields could be transmitted to the US bond market through global financial linkages, further exacerbating upward pressure on US interest rates and amplifying market volatility. The core cause of this series of market disturbances largely stems from the Trump administration's foreign policy adjustments, with tariffs being a key driver.

Tariff policies backfire on fiscal policy, reshaping global capital flows and exacerbating interest rate pressures.

The US government's initial intention in imposing tariffs was to expand fiscal revenue and optimize the fiscal structure. However, the policy failed to achieve the expected revenue increase and instead created a strong fiscal backlash, continuously increasing the federal fiscal burden. On the one hand, tariffs triggered trade retaliation from many countries. To offset the impact on domestic industries such as agriculture, the US allocated $12 billion in special funds for industrial subsidies, directly increasing fiscal expenditure. On the other hand, the US federal debt has exceeded $40 trillion. This massive debt is highly sensitive to interest rate changes; for every 0.1% increase in market interest rates, the federal government's annual interest payments increase by $40 billion, and high interest rates continue to amplify the risk of US debt. Simultaneously, tariffs combined with foreign defense pressure policies have completely reshaped the global flow of US dollar funds, further pushing up US Treasury yields. The US's forced allies to increase defense spending has significantly reduced the savings available for investment in US Treasury bonds, while the US itself has not only failed to reduce military spending but has also planned a massive $1.5 trillion military budget, completely disrupting the global supply and demand balance for US Treasury bonds. Furthermore, sovereign institutions in many countries have expressed concerns about the uncertainty of US policy, leading to a continued reduction in their holdings of US Treasury bonds. The core investors in US Treasury bonds are gradually shifting to private investors who are highly sensitive to risk and return. These investors demand higher interest rates to hedge against inflation and policy risks, becoming a significant driving force behind the continued rise in US Treasury yields.

The core economic paradox of increased tariffs: the misalignment between book profits and deteriorating fundamentals.

From a fundamental perspective, the US tariff policy presents a significant economic paradox: while tariffs may generate short-term fiscal revenue on paper, they are a typical example of destructive revenue generation, failing to boost the creditworthiness of US Treasury bonds. Instead, they dilute policy benefits and worsen economic fundamentals through multiple channels. The core credit support for US Treasury bonds stems from low inflation, economic stability, fiscal sustainability, and supply chain security, all of which are undermined by tariff policies. Ultimately, the costs of tariffs are borne by US businesses and consumers, directly pushing up domestic prices and exacerbating inflationary pressures. Rising inflation forces the market to raise US Treasury yields, and the new interest expenses generated by the massive debt far exceed the tax revenue increase from tariffs. Simultaneously, the hollowing out of US manufacturing and the highly import-dependent supply chain structure mean that tariffs cannot effectively reduce import volume; they only passively increase domestic commodity costs. Coupled with export losses and industrial subsidy expenditures resulting from trade retaliation, this further compresses actual fiscal revenue. Furthermore, tariffs raise overall production and consumption costs, suppressing market investment and dragging down economic growth, leading to a shrinking of core fiscal revenue sources such as income tax, creating a dilemma of "increased revenue but not increased profits." Overall, the short-term paper gains from tariffs were completely offset by the triple factors of high inflation, rising interest rates, and a weakening economy, ultimately creating a vicious cycle of "tariffs → inflation → high interest rates → high debt costs," which became the key micro-level cause of the current runaway US Treasury yields.

Geopolitical conflicts coupled with domestic threats have solidified the pattern of high interest rates and high inflation.

The outbreak of the Iran-Iraq War further exacerbated the US bond market and inflation situation, solidifying the high-interest-rate and high-inflation pattern from multiple dimensions. This geopolitical conflict significantly increased US defense spending, further expanding the fiscal deficit; it also caused infrastructure damage in the Persian Gulf region, leading to a surge in reconstruction needs in Middle Eastern countries and significantly weakening their ability to invest in US Treasury bonds; more importantly, it severely disrupted the global energy supply chain, pushing up inflation risks. While international crude oil prices have fallen somewhat since the beginning of the war, diesel prices have reached a ten-year high, stemming from supply chain disruptions in the two core energy refining regions of the Persian Gulf and Russia. This disruption will continue to ripple through to the real economy sectors such as logistics and agriculture, prolonging the high-inflation cycle. Besides external geopolitical shocks, domestic fiscal vulnerabilities and the lack of credibility of the Federal Reserve are the core internal factors contributing to persistently high interest rates. Currently, the US fiscal deficit has reached a record high outside of recessions, with an annual deficit of $2.1 trillion, accounting for 6% of GDP. Federal debt interest payments as a percentage of GDP have also rebounded to their highest level since 1990. This massive debt deficit has led to strong market doubts about the sustainability of US fiscal policy, continuously pushing interest rates upward. Meanwhile, the Federal Reserve's policy independence has been questioned, further amplifying market risk premiums. Newly appointed Fed Chairman Kevin Warsh, traditionally a hawkish anti-inflation advocate, maintained interest rates unchanged at his first policy meeting, with three members voting against a rate hike. Coupled with frequent public criticism of the Fed and attempts by the White House to remove key officials, market concerns arose that monetary policy was being politically manipulated, significantly damaging the Fed's credibility in combating inflation. Since central bank independence is a core guarantee for stable inflation, the uncertainty brought about by political interference led investors to demand higher interest rates to compensate for the risk, further pushing up US Treasury yields. The subsequent Iran war further exacerbated pressures on US interest rates and the bond market. This geopolitical conflict impacted the market from three dimensions: first, it further increased US defense spending, widening the fiscal deficit; second, it caused damage to infrastructure in the Persian Gulf region, leading to a surge in reconstruction demand in Middle Eastern countries and significantly weakening their ability to invest in US Treasury bonds; and third, it exacerbated disruptions to the global energy supply chain, increasing inflation risks. Although international crude oil prices have fallen somewhat since the beginning of the war, diesel prices have hit a ten-year high, reflecting the damage to the supply chains of the two major energy and refining regions of the Persian Gulf and Russia. This damage will continue to spread to the real economy sectors such as logistics and agriculture, further solidifying the high inflation and high interest rate environment.

Global markets are showing significant divergence, with regional economies facing varying degrees of pressure.

Against the backdrop of global high inflation, high interest rates, and geopolitical conflicts, the global financial market exhibits a clear regional differentiation, with significant differences in the degree of pressure on national economies. Some Latin American countries, leveraging their geographical advantages of being far from the centers of conflict, coupled with the energy export advantages of countries like Brazil and Colombia, and Mexico's relatively stable trade relations with the US, have generally maintained stable currencies and capital markets. In contrast, South Asian and Southeast Asian economies, heavily reliant on Persian Gulf energy imports, are under significant pressure, with countries like India and Indonesia experiencing significant shocks to their economies and financial markets. India, in particular, faces not only the pressure of rising energy import costs but also the impact of the artificial intelligence revolution on its core service export industries, further exacerbating the risks of economic downturn and financial volatility. This current global environment of high interest rates and high inflation has resulted in a clear regional differentiation in the global financial market. Some Latin American countries, leveraging their geographical distance from geopolitical conflicts, the energy export advantages of countries like Brazil and Colombia, and Mexico's relatively stable trade relations with the US, have maintained relatively stable currencies and capital markets. However, South Asian and Southeast Asian countries, heavily reliant on Persian Gulf energy imports, are under significant pressure, with countries like India and Indonesia experiencing significant shocks to their economies and financial markets. India also faces the added challenge of the impact of the artificial intelligence industry on service exports, further increasing its downward pressure on its economy.

Summary and Opinions:

Overall, the current runaway trend in US Treasury yields is the result of a confluence of factors, including the negative effects of tariffs, geopolitical and military conflicts, a massive fiscal deficit, and a lack of credibility in the Federal Reserve's policies. Among these, the economic paradox of tariff policy is the core microeconomic trigger: short-term increases in revenue are ultimately offset by rising inflation, soaring interest rates, and a weakening economy, creating a persistent negative macroeconomic cycle. In the short term, the situation in the Iran war and the progress of global energy supply chain recovery are key variables for mitigating inflation and stabilizing US Treasury yields. If the US continues to maintain its policy stance of high tariffs and geopolitical confrontation, the economic landscape of high interest rates, high inflation, and high debt may become entrenched in the long term, not only continuously dragging down the US's own economic recovery but also disrupting the stability of the global trade and financial system in the long run.