Mona Ali
On April 2, 2025, Trump’s “Liberation Day” pronouncements of rebalancing trade through new reciprocal tariffs on most countries — based on spurious calculations of how much another country’s bilateral trade surplus had hurt the United States — sharply drove up yields on benchmark ten-year US Treasuries. (Bond prices are inversely correlated with interest rates, which means that higher yields indicate declining demand for Treasuries.) The rate on the thirty-year Treasury bond briefly topped 5 percentage points. Bloomberg reporters euphemistically described the swooning equity markets as “rebalancing.” The dollar slid in global currency markets. Having declared a trade war on allies and adversaries alike, Trump has tarnished the “safe haven” appeal of the dollar and the United States. However, a 10 percent decline in the previously expensive dollar has been the one silver lining of the Liberation Day storm.
Trump’s decisions induce whiplash. While he has expressed preference for a lower dollar for, among other things, “rebalancing” trade, what the next four years of on-and-off presidential decrees will do to the dollar’s status will ultimately be decided by how financial markets — whose size vastly outweighs global trade — digest forthcoming shocks. While market volatility hurts households and Main Street, trading volatility has proven hugely beneficial for the big global banks such as JPMorgan Chase and Goldman Sachs, whose trading revenues have been at a decade high.
April’s tremors in the Treasury market, adjacent Treasury repo market, and far bigger interest-rate swap derivatives market — evidenced by widening interest-rate swap spreads — did not threaten US credit markets. However, Trump’s blustering that the United States should annex Canada and Greenland have prompted Canadian and Danish pension…
Auteur: Mona Ali
