Trump is facing a new inflation warning from the bond market, adding to his midterm challenges

President Donald Trump speaks during a Cabinet meeting at the White House, Wednesday, May 27, 2026, in Washington, as Secretary of Defense Pete Hegseth, looks on. (AP Photo/Jacquelyn Martin)2026-06-01T04:01:47Z WASHINGTON (AP) — The world is getting more uptight about lending money to President Donald Trump’s government — causing interest rates to climb in ways that are worsening affordability pressures, hampering economic growth and creating a new risk for Republicans in November’s midterm elections.The energy price spike triggered by the Iran war has seeped into the price of bonds that help fund the U.S. government. Interest rates on a 10-year U.S. Treasury note are topping 4.44%, up from 3.95% before the war started at the end of February. Average mortgage rates have climbed to their highest levels in nine months, while auto sales are slumping.The challenge is global in scale, as interest rates have risen for multiple countries as the world has been adjusting to the prospect of higher inflation, mounting questions about the sustainability of government debt and a dramatic surge in investment in artificial intelligence. Trump has tried to assure Americans that he has a plan to trim the roughly $1.8 trillion annual budget deficit. In the past, he has pointed to revenue from tariffs, payments from foreigners for his “Gold Card” visa, spending cuts made by the Department of Government Efficiency, and faster economic growth. Last week, he said the fraud task force led by Vice President JD Vance would be the key to unlocking massive savings.“If he does really great, we’ll have a balanced budget without having to do anything,” Trump said. Economists say this is probably unrealisticEconomists say Trump’s strategies to meaningfully curb the deficit are unlikely to deliver the promised results.The cost of servicing the national debt has tripled since 2021 to more than $1 trillion annually, said Jessica Riedl, a budget and tax fellow at the Brookings Institution.“President Trump signed a tax cut bill that will likely add $5 trillion to 10-year deficits — and tariffs are offsetting only a small fraction of those costs,” she said. “Budget deficits are still projected to soar past $4 trillion annually within a decade under current policies.” Read More Deficits are expected to grow over the next decade as the costs of Social Security and Medicare outstrip tax revenues. The 10-year U.S. Treasury rate climbed as high as 4.67% in the middle of May and has since eased as negotiations over the Iran ceasefire continued — just as rates initially climbed in 2025 because of Trump’s “Liberation Day” tariffs and then began to decline once Trump backed off the most extreme increases.When Kent Smetters, faculty director of the Penn Wharton Budget Model, broke down the math tied to rising 30-year Treasury yields, he estimated that 60% of the increase had come from the expectation that America will continue its outsized borrowing and the other 40% was tied to the inflation driven by the Iran war and Trump’s tariffs.Glenn Hubbard, a former chairman of the White House Council of Economic Advisers during the George W. Bush administration, worries that the U.S. may no longer have the same borrowing capacity as before to effectively combat an economic crisis, such as the 2008 crash or the coronavirus pandemic.“I don’t think we have the space that we had in 2008 or 2020 to deal with it,” said Hubbard, now a professor at Columbia University’s Business School. “Washington doesn’t seem to be full of ideas — good or bad — to solve it.” Interest rates are a concern for votersHigher interest rates are giving Democratic candidates in the races to determine control of the House and Senate another line of attack at a time when voters are concerned about high costs for food and gasoline.In Colorado’s fifth congressional district, Democrat Jessica Killin is leaning into the message that the persistent deficits and higher interest rates make it harder to buy or renovate a home, afford a new car or manage credit card debt.“Things are already expensive,” said Killin, an Army veteran who was a top aide to Doug Emhoff, the former second gentleman. “We can already talk about gas, but the cost of borrowing only makes that worse.”Joe Reagan, an Army veteran also seeking the Democratic nomination, said in an email that he is talking “a lot about fiscal stewardship” in his campaign. “Every dollar spent paying interest is a dollar that isn’t being invested in infrastructure, education, veterans’ services, or economic growth,” he said. They are challenging Republican Rep. Jeff Crank in a district that their party views as a potential pickup. Killin said the deficit is an example of how “Trump says one thing and does the opposite.” In his March 2025 address to Congress, Trump declared that “in the near future, I want to do what has not been done in 24 years: balance the federal budget. We’re going to balance it.”Crank, the Republican incumbent, did not r

President Donald Trump speaks during a Cabinet meeting at the White House, Wednesday, May 27, 2026, in Washington, as Secretary of Defense Pete Hegseth, looks on. (AP Photo/Jacquelyn Martin)2026-06-01T04:01:47Z WASHINGTON (AP) — The world is getting more uptight about lending money to President Donald Trump’s government — causing interest rates to climb in ways that…

President Donald Trump speaks during a Cabinet meeting at the White House, Wednesday, May 27, 2026, in Washington, as Secretary of Defense Pete Hegseth, looks on. (AP Photo/Jacquelyn Martin)2026-06-01T04:01:47Z WASHINGTON (AP) — The world is getting more uptight about lending money to President Donald Trump’s government — causing interest rates to climb in ways that are worsening affordability pressures, hampering economic growth and creating a new risk for Republicans in November’s midterm elections.The energy price spike triggered by the Iran war has seeped into the…