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The dollar slid towards a three-year low and US government bonds came under pressure on Monday as weak manufacturing data combined with growing warnings over the sustainability of the country’s debt pile to unnerve investors.

The dollar was down 0.7 per cent against a basket of its trading partners, taking it close to the three-year low it hit in the wake of Trump’s “liberation day” tariff blitz in early March.

The blue-chip S&P 500 index was down 0.3 per cent by mid-morning trading, after an ISM survey of purchasing managers in the manufacturing sector came in weaker than expected at 48.5 for May — below the 50 level that separates expansion and contraction.

It was also a weaker showing than the previous month, in the latest sign that Donald Trump’s unpredictable trade war is weighing on the world’s largest economy.

Analysts at Capital Economics said the “surprise decline . . . indicates that tariffs continue to weigh significantly on the sector”.

The yield on 30-year US government bonds rose 0.03 percentage points to 4.96 per cent as the price of the debt fell, in the first trading after Treasury secretary Scott Bessent moved to reassure the markets that the country is “never going to default”, amid growing warnings over debt sustainability.

JPMorgan Chase chief executive Jamie Dimon had warned on Friday that the US bond market could “crack” under the weight of Washington’s rising debt load.