Credibility of different tariff threats

Investors and the US administration are likely to keep focus on the US Treasury bond market, which weakened modestly in the wake of US President Trump’s latest tariff threats. The implications of additional tariffs are more US inflation pressures and a further erosion of the USD’s status as a reserve currency. So far, bond investors do not seem to be taking the threats too seriously. Trump also threatened to tax US drinkers of champagne and Bordeaux, if French President Macron refuses to join the Board of Peace for Gaza. Markets seem inclined to dismiss this too.