According to data from the US Treasury and the Federal Reserve, the 10-year US Treasury yield started 2025 at around 4.6%, averaged roughly 4.58% in January, and then eased slightly to about 4.38% by March. The yield stayed in the mid-4% range through the second quarter, averaging around 4.4% in May and June. Overall, Treasury yields remained relatively steady in early 2025, reflecting expectations of slower growth and uncertainty around US trade and tariff policies.
Economists say this yield level partly reflects the assumption that the US will keep receiving hundreds of billions of dollars in tariff revenue. That inflow helps the government’s finances look more stable—and gives bond investors confidence that Washington won’t need to borrow as much money elsewhere.
If Tariff Revenues Don’t Come Through
But what if those tariff inflows don’t actually materialise?
In an interview with CNBC-TV18, Jahangir Aziz, Head of Emerging Markets Economic Research at JP Morgan, explained it clearly: “If tariffs are off, and we don’t even know what will replace them, it will be anywhere close to giving you the $300–350 billion… then one of the largest anchors of the 10-year rate is off.”
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In simpler terms, if the US stops collecting that much from tariffs, one of the main supports for bond yields disappears. Without that anchor, yields could swing higher or become more volatile as investors worry about larger fiscal deficits or new borrowing needs.Why It Matters Globally — And for India
Higher US bond yields make borrowing more expensive globally. They can also strengthen the US dollar, draw money out of emerging markets, and make global financing tighter.
For India, that means potential challenges: higher global yields can pressure the rupee, increase borrowing costs, and make it harder for foreign investors to commit long-term funds.
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However, if tariff revenues remain strong and markets feel assured, yields could stay steady or even decline slightly—giving global markets and emerging economies some breathing space.
The Bottom Line
The expected $300-$350 billion tariff inflow may seem like a technical detail, but it has global ripple effects. It’s now a key factor shaping how investors view US debt, interest rates, and global capital flows. If the inflows come through, the world gets a more stable rate environment. If they don’t, volatility could rise—and emerging markets like India may feel the squeeze first.
Watch the interview in the accompanying video
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