Category: 3. Business

President Donald Trump and the Republican-led Congress have implemented several major policy changes in the first seven months of 2025. Those changes include raising tariffs on dozens of U.S. trading partners, extending Trump’s first-term tax cuts and adding new ones, and boosting spending on border security and immigration enforcement. Lawmakers have partially offset the tax cuts and spending increases by cutting Medicaid, foreign aid, education grants and other federal programs.

Many analysts project that these policies will further widen the U.S. budget deficit – the gap between how much the federal government takes in and how much it spends. Even before the policy changes, a majority of Americans saw the federal budget deficit as a “very big problem” for the country today, according to a Pew Research Center survey conducted in January and February.

Deficits have to be funded by borrowing, which, for the federal government, means selling bonds to investors. Those investors then resell and trade those bonds in what’s generally referred to as the “bond market.” How the bond market reacts to the administration’s actions not only determines how much interest the government must pay to borrow money; it also influences how much interest ordinary Americans will pay on car loans, mortgages and credit card bills. That’s because interest rates on all sorts of loans tend to move in the same direction.

Here are some basics about bonds and the bond market, using data from the U.S. Treasury and from the Securities Industry and Financial Markets Association (SIFMA), a trade group for banks, securities firms and asset managers.

What’s a bond?

A bond is basically a promise to repay a specified sum of money according to rules (interest rate, timing, etc.) that are set when the bond is issued. It’s an alternative to borrowing money from a bank or other financial institution. Governments can borrow from banks, too – especially institutions like the World Bank or the International Monetary Fund – but more commonly they’ll sell bonds to investors when they need extra money.

Bonds are often referred to as “fixed-income” investments because they typically pay interest on a specified schedule – for instance, 5% a year for 10 years, payable semiannually. Those predictable payments can make bonds attractive to a wide range of investors.

Many types of public and private entities can issue bonds, including national governments; states, cities and counties; school districts and other specialized districts; and companies. But since this analysis is about U.S. government bonds, from here on we’ll use “bonds” to refer specifically to those. (They’re also called Treasurys or T-bonds, because the U.S. Treasury Department issues them. The Treasury also sells shorter-term instruments called bills and notes, but for simplicity we’ll refer to them all as bonds.)

How are bonds bought and sold?

The Treasury raises money by selling bonds at regularly scheduled public auctions. At those auctions, individual and institutional investors can specify how much debt they want to buy (with a $100 minimum) and the return they’re looking for.

An investor who buys, say, a 10-year Treasury bond for $10,000, always has the option of hanging onto it. They can collect a decade’s worth of interest payments before the bond “matures” and they get back their original $10,000.

But bonds can also be traded on financial markets, much like stocks. Tradable bonds are also referred to as “debt securities.” Investors can buy and sell bonds at any time before they mature.

Most Treasury debt (about 78.5%, or $29 trillion as of July 2025) is tradable. Treasury securities that aren’t tradable include U.S. savings bonds and the special bonds held by the Social Security and Medicare trust funds.

However, the bond market is much more opaque than the stock market. There’s no physical building or centralized electronic exchange where trading takes place, with prices quoted publicly and in real time. Most of the time, bonds are traded “over the counter” – that is, between private firms called broker-dealers, acting either on behalf of their clients or for their own accounts.

The original issuers don’t directly benefit from trading activity in the bond market. But how an issuer’s bonds fare in the market can influence how much it may have to pay if (or when) it comes back to borrow more.

Related: Key facts about the U.S. national debt

What’s a bond worth?

Investors’ willingness to buy government bonds, and the price they are willing to pay, depends largely on how risky they consider the bonds and whether they can make more money elsewhere. Investors consider many factors when gauging a bond’s value. Some factors involve the general economic and financial climate, such as:

• The strength of the overall economy
• Anticipated future inflation
• The rates of return available from other investments

Other factors are specific to the governmental entity that issued the bond, such as its:

• Total debt load, spending habits and general fiscal management
• Ability (and willingness) to raise taxes to make the interest payments on time
• Political stability

All this matters because bond prices, like stock prices, can move up or down. And that changes the bond’s yield, or the effective return investors get.

When a bond’s price falls, its yield rises; if the price rises, the yield goes down. That’s because, when the price goes down, investors are getting the original interest payments at a discount. When it goes up, they’re paying a premium. (Yield is determined by a rather complicated formula; the following example is somewhat simplified.)

Let’s say the federal government issues $10 million in new bonds to cover some of its deficit. Each bond pays 5% interest annually (half every six months), and they start trading in the bond market as soon as they’re issued.

If traders think the bonds are good investments, they may bid the price up – paying, say, $110 for a bond with a face value of $100. The yield on that bond falls from 5% to 3.79%.

But if traders get worried that the government’s debt load is becoming unsustainable, or that higher inflation may erode the value of their interest payments, they may be only willing to pay $90 for a $100 bond. In that case, the yield rises, to 6.37%.

In general, the more risk investors perceive, the higher return they’ll expect on their investment. And if investors can get a 6.37% yield on existing government bonds by buying them at a discount, the government will have to offer an interest rate close to that the next time it wants to sell new bonds.

How big is the bond market?

The worldwide market for fixed-income securities of all types totaled $145.1 trillion in 2024 – bigger than the global stock market, according to SIFMA. The U.S. fixed-income market is the world’s largest at $58.2 trillion, or 40.1% of the total. (That figure includes all types of debt securities from both public- and private-sector issuers.)

U.S. government securities, in turn, are the biggest piece of the overall U.S. bond market. In the first quarter of 2025, $28.6 trillion worth of Treasurys were outstanding, more than twice the amount of corporate bonds. Treasurys accounted for 60.3% of all U.S. debt securities (excluding mortgage- and asset-backed securities), up from 47.6% a decade ago.

How can the bond market influence government policy?

The federal government borrows a lot of money – both to refinance older debt as it comes due and to fund new spending. Last year, it issued $4.67 trillion in Treasury securities, or about 45% of all new debt in the U.S., according to SIFMA. Through July of this year, the government had issued more than $2.8 trillion in Treasurys.

The government also borrows frequently. The shortest-term securities, called Treasury bills or T-bills, are auctioned as often as weekly, while longer-term bonds are sold monthly or quarterly. That means the Treasury is constantly getting feedback from bond traders about how they view the economy and the government’s actions.

One example occurred in April, shortly after Trump announced sweeping tariff increases on most U.S. trading partners. Treasury yields rose sharply, suggesting that investors were selling off government bonds. Within days, Trump paused many of the steepest tariffs, noting that the bond markets “were getting a little queasy.”

When higher yields in the bond market force the government to pay higher interest rates on newly issued debt, that means more tax dollars have to go to interest payments – instead of, say, the Pentagon, education, public health or disaster relief.

In fiscal 2024, the government’s interest payments on Treasury debt securities (after crediting various government trust funds) totaled $879.9 billion, or 13% of all outlays that year. For context, that roughly matched what the government spent on defense ($873.5 billion) and Medicare ($874.1 billion).

Different bonds have different interest rates, depending on when they were issued and how long their terms are. But the average interest rate on all U.S. government bonds can indicate the broad trend of the government’s borrowing costs.

In July, the average rate on all interest-bearing Treasury debt was 3.352%, according to Treasury Department data. That’s still well below decades past – for example, the average rate was nearly 9% in 1989 and nearly 6.6% in January 2001. But it’s the highest average rate since October 2009, and more than double the most recent low (1.556% in January 2022).

In May, Moody’s – one of the three major debt-rating firms that help investors gauge how risky bonds are – cut its grade on U.S. government debt, saying it believed “persistent, large fiscal deficits will drive the government’s debt and interest burden higher.” It was the last major rating agency to do so.

The MIT Media Lab is pleased to welcome Mitsubishi Electric Corporation as a new member of our global consortium. 

A world leader in electric and electronic equipment for residential, commercial, and industrial use, Mitsubishi Electric joins a vibrant ecosystem of researchers, artists, engineers, and technologists dedicated to shaping a more just, sustainable, and creative future.

Founded in 1921, Mitsubishi Electric is guided by its enduring Purpose: “to contribute to the realization of a vibrant and sustainable society through continuous technological innovation and ceaseless creativity.” With over 213 group companies and a workforce of 149,000 employees worldwide, the company is deeply committed to addressing pressing societal challenges through bold innovation and responsible leadership.

The company operates across five business domains: Infrastructure, Industry & Mobility, Life, Business Platform, and Semiconductors & Devices. Its products and solutions range from smart energy systems and public infrastructure to factory automation, automotive technologies, space systems, building solutions, and advanced semiconductor components. Mitsubishi Electric is also a global intellectual property leader—ranking #1 in Japan and #4 worldwide in international patent applications according to the World Intellectual Property Organization.

“Collaborating with the MIT Media Lab is an exciting step toward co-creating innovative solutions for a vibrant and sustainable society. Together, we aim to spark new value through the fusion of technology, creativity, and purpose.”

— Satoshi Takeda, SVP, CDO, CIO, Group President of Digital Innovation, Mitsubishi Electric 

Mitsubishi Electric’s membership reinforces its forward-looking strategy to transform into a Circular Digital-Engineering company. Through its proprietary digital platform, Serendie, the company is building new value by connecting data across industries and unlocking solutions to real-world problems—from energy optimization to resilient manufacturing and intelligent infrastructure.

The company’s global sustainability commitments are equally ambitious. By FY2051, Mitsubishi Electric aims to achieve net-zero greenhouse gas emissions across its entire value chain. Through its “Trade-On” (mutual benefits) model, the company integrates social impact and environmental responsibility directly into business growth. Its efforts to prioritize wellness and engagement for all, along with its leadership in human rights and governance reform, reflect a holistic vision of a future-ready corporation.

“We’re excited to welcome Mitsubishi Electric to our community of collaborators at the MIT Media Lab. Their values and vision align beautifully with our mission to invent a better, more inclusive future.”

— Mirei Rioux, Director of Member Operations, MIT Media Lab 

This new collaboration will foster cutting-edge research and experimentation across the Lab’s five research themes. Mitsubishi Electric’s technical depth, commitment to co-creation, and global perspective will help fuel shared breakthroughs—advancing the Lab’s mission to build technologies that serve humanity on Earth and beyond.

Donald Trump hit out at Goldman Sachs CEO David Solomon on Tuesday, saying the bank had been wrong to predict tariffs would hurt the economy and questioning whether Solomon should lead the Wall Street institution.

In a post on Truth Social, Trump said it was mostly foreign companies and governments absorbing the cost of his tariffs. “But David Solomon and Goldman Sachs refuse to give credit where credit is due. They made a bad prediction…on both the Market repercussion and the Tariffs themselves,” he wrote.

Trump said Solomon should maybe focus on being a DJ, a hobby Solomon abandoned some time ago, “and not bother running a major Financial Institution”.

The bank CEO is the latest corporate boss to become the target of Trump’s ire.

A Goldman Sachs spokesperson declined to comment. A spokesperson for the White House did not immediately respond to a request for comment.

Since 1 February, when Trump kicked off trade wars by slapping levies on imports from Mexico, Canada and China, at least 333 companies worldwide have reacted to the tariffs in some manner, as of Tuesday, according to a Reuters tracker.

While Trump did not specify which Goldman research he was referring to, the Wall Street bank – like many of its peers – has taken a bearish stance on Trump‘s tariffs.

In a note published on Sunday, Goldman Sachs analysts, led by chief economist Jan Hatzius, said US consumers had absorbed 22% of tariff costs through June and that figure could rise to 67% if recent tariffs continue on the same trajectory.

“I think that David should go out and get himself a new economist,” Trump wrote. Hatzius declined to comment.

In April, Goldman also warned sweeping US tariffs would weigh on global growth and prompt the Federal Reserve to cut interest rates more aggressively than previously expected.

Last week, the president demanded Intel chief Lip Bu-Tan resign due to his ties to Chinese firms, and has repeatedly targeted Apple boss Tim Cook for making US-sold iPhones outside the country.

Trump has also taken aim at other Wall Street banks, alleging, without providing evidence, that JP Morgan and Bank of America discriminated against him by refusing his deposits after his first term.

As the second quarter earnings season progresses, companies have reported a combined financial hit of $13.6bn to $15.2bn between 16 July and 8 August for the full year from Trump‘s tariffs, according to Reuters’ global tariff tracker.

Borealis, Dow, and Neste separately have decided to drop plans for major plastics recycling plants in Europe. The moves add to the spate of plastics recycling plant closures and bankruptcies that have taken place in the region due to plentiful, cheaper virgin plastic undercutting the price of recycled plastic.

Borealis has put on hold its plan to open a 60,000-metric-ton-(t)-per-year polyolefin mechanical recycling plant in Schwechat, Austria. The Austrian firm had aimed to open the plant by year-end. “A detailed evaluation of the project revealed that in the current market environment the plant would not meet the expected performance targets,” the company tells C&EN in an email.

Meanwhile, Dow has ditched its plan, announced in 2022, to build a 120,000-t-per-year plant to chemically recycle mixed plastic waste in Böhlen, Germany. The recycling facility was due to deploy Mura Technology’s Hydro-PRT technology, which uses supercritical steam to crack polymer bonds in plastics to form oil.

It follows Dow’s decision in July to permanently close its ethylene cracker and associated petrochemical facilities in Böhlen in 2027. Oils from the proposed plastics recycling plant would have been used as feedstock in the cracker. Dow says it is closing the cracker because of high operating costs in Europe, including the high cost of energy.

Separately, Neste and Belgian plastics supplier Ravago Manufacturing have halted plans to jointly build and operate a 55,000-t-per-year plastics-to-chemicals recycling plant in Vlissingen, the Netherlands. The plant would have used a pyrolysis technology developed by the US firm Alterra Energy.

The industry group Plastics Recyclers Europe has been warning about unfair competition for European plastics recyclers for more than a year. The group sent a letter to all European Union member governments in May stating that the sector “is facing a deepening crisis that requires political action.” Prices for virgin materials remain much lower, demand for recycled content is weak, and third-country—including Chinese—competition is intensifying, the group states.

Europe produces more than 20 million t per year of ethylene, a key raw material for polymers. The region also recycles about 10 million t of plastic each year. Recycling plastic mechanically saves about 2.5 t of carbon dioxide for each 1 t of plastic produced compared with the production of virgin plastic from oil, according to European recycling association EuRIC.