“But this week, and this is what I think shook the White House and shook the Oval Office, interest rates started crawling up,” Buchholz stated, indicating this unexpected move signalled deep concern among global investors about the stability of the US Treasury market and the global system. He believes this prompted Trump to impose the “90-day hiatus to allow for further negotiations.”
Buchholz pointed out that Trump’s extensive background as a real estate developer strongly influences his focus on borrowing costs.”What do real estate developers want? Low interest rates. Low financing rates,” Buchholz explained. Therefore, the prospect of rising rates due to trade chaos was a significant factor motivating the President to step back from immediate escalation.
Despite the pause, Buchholz warned that significant economic risks persist. He noted that ongoing trade tensions are putting the global economy “in a squeeze,” raising concerns about potential stagflation—a damaging combination of economic recession and rising inflation occurring simultaneously.The former advisor also highlighted the vulnerability of supply chains and jobs. He cautioned that tariffs could disrupt manufacturing even if only a small percentage of parts are imported. If companies cannot access essential components, production lines can halt, leading to potential layoffs because incomplete goods cannot be sold.
Regarding inflation, while tariffs directly increase the price of imports, Buchholz argued that the Federal Reserve’s control over the money supply is the more critical factor for overall price levels. He suggested that unless the Fed injects more money, rising import costs might simply force consumers to cut back elsewhere, potentially pushing down prices for domestic goods and services.
Looking forward, Buchholz anticipates a potential shift in US trade strategy. He expects the administration will try to manage the conflict, perhaps focusing more intensely on the disputes with China while actively seeking to improve trade relations and secure deals with key allies like India and Japan, based on the idea that “nations that march together should trade together.”
However, resolving the trade conflict with China remains a significant challenge. Buchholz expressed scepticism about reaching a comprehensive agreement soon, citing deep geopolitical tensions and China’s own economic ambitions.
“I don’t think this trade war with China is going to end very soon,” he remarked, although he conceded that the extremely high tariff levels might not be permanent.
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