The move has angered Elon Musk who warned it will “burden American citizens with crushingly unsustainable debt”. But economists and financial experts are worried too.
In October 2022 Liz Truss was forced to U-turn over her mini-Budget after a spectacularly negative reaction in the bond markets. The pound fell and interest rates soared. Some mortgage providers even temporarily suspended lending.
Truss was thereafter linked with a lettuce, after the Daily Star newspaper began livestreaming a leaf vegetable to see if it would outlast her premiership. It did.
“It’s the same as Liz Truss,” says Desmond Lachman, a former deputy director at the International Monetary Fund (IMF), who is convinced that Trump’s “insane” policies will push the US into a financial crisis, though he is unsure how quickly it may occur.
Other experts, though, point out that the US is far better insulated from a bond market disruption than the UK and that there is still time for Trump to pull back.
The nonpartisan Congressional Budget Office (CBO) has estimated the bill, which steps up military and border security spending as well as extends tax cuts – will add about $2.4tr to the $36tr deficit.
And Musk, turning on his former ally, has called Trump’s One, Big Beautiful Bill Act a “disgusting abomination”.
Trump did partly back down on tariffs in response to market jitters – announcing a 90-day pause in early April. The Republican President admitted then that the markets had been “getting a little queasy”.
Since early April, 10-year US Treasury bond yields have crept up from around 4 per cent to almost 4.5 per cent.
Some economists fear further negativity in the bond market could create a dangerous economic spiral – somewhat similar to what the UK went through in 2022.
‘The numbers don’t add up’
He believes the US bond market could “force” a change in the US Government’s approach to debt management if yields soared to around 5 per cent.
He added: “My guess is that Trump may not face a Liz Truss moment this year, but the US is still at risk of one day facing the Liz Truss moment.”
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“The numbers just don’t add up. You can’t add almost £3tr to the deficit and expect nothing to happen. These policies are insane. The tariffs policy is crazy and tax cuts are crazy.”
Trump will only change course if markets force him to, Lachman added.
Others are worried by warning signs of trouble but are more cautious about the idea that the US is heading for a market meltdown.
But Pryce warned that market turmoil – as the Truss administration experienced in 2022 – could still force Trump to change course.
The impact of Liz Truss’s mini-budget in 2022“Clearly the markets have questioned it,” said the top economist. “So far bond yields haven’t increased that significantly.”
Susannah Streeter, head of money and markets at financial firm Hargreaves Lansdown, said bond yields had certainly “edged up” of late. She said there were signs investors are “baulking at financing the Trump administration”.
He added: “Credibility is a bucket of water and the US has filled it up over decades but it can be easily lost with one spill. The bond market is signalling that the US bucket is leaking.”
Trump unlikely to be removed like Truss
She believes US Treasury bond yields appear to have “stabilised” for the time being. “I do not think that the US will experience a Liz Truss moment, since the financial markets are not giving us those signals.”
The length of Liz Truss’s time in No 10 became a viral meme (Photo: Daily Star)
But he said US bond yields were “not disastrous at this stage” and the dollar’s status as the world’s reserve currency gave Washington “far greater leeway to run large deficits”.
Economist Andrew Lilico – who has defended Truss and argued that much of 2022’s turmoil was out of her control – also thinks it is “unlikely” that economic policy will be forced out of Trump’s hands.
Lilico warned that unknown “nasties” could be waiting to be triggered in the US financial sector – like the UK saw in 2022 with underlying problems in pension funds – if markets did react badly to Trump’s bill.
Asked for comment, Truss’s representative pointed The i Paper to her recent editorial in the Washington Post.
The former PM said her own dramatic experience had taught her the “sheer power of the globalist economic establishment and its allies in the political arena”. Truss also urged Trump to “stay the course” on cutting taxes.
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