FT: Economic pressure mounts in the Trump era—oil prices and mortgage rates rise in tandem, and U.S. debt surpasses $4 trillion
On August 22, the Financial Times reported that the Trump administration’s economic policies are facing multiple pressures: U.S. federal debt has exceeded $4 trillion, long-term Treasury yields have climbed to their highest level in 19 years, a war with Iran has pushed up energy prices, and mortgage rates have continued to rise. This week, the U.S. long-term government bond market saw sharp volatility. Investors, worried that the government’s borrowing scale will expand and that war-driven inflation risks will materialize, pushed long-term Treasury yields higher. U.S. Treasury Secretary Bessent then announced an expansion of the long-term Treasury repurchase program and plans to roll out measures to reduce the fiscal deficit, but the market reaction was limited and the dollar instead weakened.
Data show that the size of U.S. government debt surpassed $4 trillion for the first time this week, while the growth rate of federal spending hit the fastest level since the pandemic. In fiscal year 2025, the U.S. fiscal deficit as a share of GDP only edged down to 5.8%, while Trump’s tax-cut policies are expected to further increase fiscal pressure in the future.
On energy, the conflict between the U.S. and Iran has driven up U.S. fuel prices. Gasoline prices are up by about 40% compared with before the outbreak of the war, reaching $4.11 per gallon; diesel prices have risen to $5.58 per gallon. Rising energy costs have weakened the policy goal of lowering living costs and energy prices that Trump had previously pursued.
The housing market is also under pressure: the 30-year mortgage rate in the U.S. has risen to 6.65%, higher than 5.98% before the outbreak of the war. Meanwhile, U.S. consumer inflation in May briefly rose to a three-year high of 4.2%, before easing to 3.4% in July; however, Federal Reserve officials remain concerned that inflation pressure will persist.
Although the U.S. economy continues to be supported by consumer spending and large tech companies’ AI infrastructure investment, its growth rate remains below the government’s earlier targets. The annualized U.S. GDP growth rate in the second quarter of 2026 is about 1.5%, lower than the previously proposed forecast of above 3%.
Market participants believe that high debt, high financing costs, and rising energy prices are undermining consumer confidence and could become a significant political pressure point for the Trump administration. Bessent, however, said the U.S. still has the prospect of improving its fiscal situation through economic growth.
On August 22, the Financial Times reported that the Trump administration’s economic policies are facing multiple pressures: U.S. federal debt has exceeded $4 trillion, long-term Treasury yields have climbed to their highest level in 19 years, a war with Iran has pushed up energy prices, and mortgage rates have continued to rise. This week, the U.S. long-term government bond market saw sharp volatility. Investors, worried that the government’s borrowing scale will expand and that war-driven inflation risks will materialize, pushed long-term Treasury yields higher. U.S. Treasury Secretary Bessent then announced an expansion of the long-term Treasury repurchase program and plans to roll out measures to reduce the fiscal deficit, but the market reaction was limited and the dollar instead weakened.
Data show that the size of U.S. government debt surpassed $4 trillion for the first time this week, while the growth rate of federal spending hit the fastest level since the pandemic. In fiscal year 2025, the U.S. fiscal deficit as a share of GDP only edged down to 5.8%, while Trump’s tax-cut policies are expected to further increase fiscal pressure in the future.
On energy, the conflict between the U.S. and Iran has driven up U.S. fuel prices. Gasoline prices are up by about 40% compared with before the outbreak of the war, reaching $4.11 per gallon; diesel prices have risen to $5.58 per gallon. Rising energy costs have weakened the policy goal of lowering living costs and energy prices that Trump had previously pursued.
The housing market is also under pressure: the 30-year mortgage rate in the U.S. has risen to 6.65%, higher than 5.98% before the outbreak of the war. Meanwhile, U.S. consumer inflation in May briefly rose to a three-year high of 4.2%, before easing to 3.4% in July; however, Federal Reserve officials remain concerned that inflation pressure will persist.
Although the U.S. economy continues to be supported by consumer spending and large tech companies’ AI infrastructure investment, its growth rate remains below the government’s earlier targets. The annualized U.S. GDP growth rate in the second quarter of 2026 is about 1.5%, lower than the previously proposed forecast of above 3%.
Market participants believe that high debt, high financing costs, and rising energy prices are undermining consumer confidence and could become a significant political pressure point for the Trump administration. Bessent, however, said the U.S. still has the prospect of improving its fiscal situation through economic growth.