washington’s charge towards a new economic order
has got markets on edge as policy changes have trickled out of the Oval Office the trade war
has escalated paused escalated again and done Tim Cook a solid trading View users everywhere are
suffering whiplash from trying to keep up and this time around stocks and crypto have taken a back
seat as a graver market rebellion threatens to destabilize Treadfi and not in the way that we’d
like so stay tuned to find out what this is all about and where the trade war could be going next
my name is Guy and you’re watching the Coin Bureau liberation Day was only about 3 weeks ago but it
feels like a lot longer much has happened since our last update so we’ll pick up where we left off
after a quick recap so as we all know on the 2nd of April Trump introduced eyewatering new tariffs
on almost every country in the world they were supposed to be targeted at countries with whom
the US has a trade deficit but also caught in the crossfire were countries like Australia with whom
the US has a large trade surplus and even some islands without human inhabitants the new tariffs
had two components first a minimum 10% rate was applied indiscriminately then an additional tariff
was calculated by taking the US trade deficit with a given country dividing it by that country’s
exports to the US then having the result the new tariffs raised the average tax on US imports
from 2.5% to 27% and markets reacted poorly to put it mildly the US stock market saw record trading
volume as mass selling gave it a multi-trillion dollar haircut major stock indices entered bare
market territory with the S&P 500 recording its biggest 48hour drop ever the CBOE volatility index
which measures investor anxiety closed at its highest level since the pandemic meanwhile BTC’s
price action appeared to hold up surprisingly well but it turned out to be a delayed dump it wasn’t
long before the orange coin fell off a cliff too and took the rest of the crypto market with it now
after Liberation Day there were various theories about how the chaos was all a game of 4D chess
too sophisticated for the smoother brains among us we highlighted one such theory in our last
update specifically the idea that the Trump administration was deliberately engineering a
recession in order to force bond yields down why would they do this well it’s because the US
has a large amount of debt that needs refinancing this year and with interest rates still elevated
from the 2022 inflationary environment refinancing up here would be expensive if bond yields
could be lowered however the debt could be refinanced at a lower cost and herein lies the
hypothetical motive for engineering a recession it would prompt an exodus from risk assets like
stocks and crypto and instead generate demand for safer assets namely US government bonds and as
bond prices and yields are inversely correlated hey presto you’ve got yourself lower yields
now on Liberation Day yields did indeed take a tumble the yield on the allimportant 10-year
Treasury dropped from a high of 4.22% 22% to a low of 3.86% on Friday the 2nd of April so over
the weekend this debt refinancing theory enjoyed a bit of wind in its sales and it was further boyed
somewhat by an interview Treasury Secretary Scott Bessant did with Tucker Carlson over that weekend
bessant told Carlson that he views himself as a quote bond salesman and celebrated the falling
bond yields now it’s not necessarily unusual for a Treasury Secretary to want lower yields
but considering the circumstances it was quite a glass half full perspective anyway according
to Bessant a 100 basis point reduction in the 10-year bond yield represents about $1 trillion in
savings for the US government so with yields under 4% he told Carlson quote I think we’re setting the
sails for a much better fiscal time but alas this was not to last on the 7th of April Bessant
told Fox Business quote “We are at a maximum tariff level.” But he was soon contradicted
by the White House when Trump threatened to raise his China tariff to 104% that was if Beijing
didn’t rescend a 34% tariff that it had introduced in retaliation for Liberation Day china responded
the same day reiterating its position that while it doesn’t want to fight tariffs and trade wars
it’s not scared of them it urged dialogue rather than further escalation but vowed to quote “Fight
to the end if Washington chose the latter.” The 34% tariff remained in place the White House then
confirmed that the 104% tariff on Chinese imports would go ahead as White House press secretary
Caroline Levit put it quote “President Trump has a spine of steel and he will not break and America
will not break under his leadership.” But in America’s bond market something did seem to break
as that night saw a dramatic sell-off of US dollar assets yields on 10-year treasuries jumped to a
high of 4.5% and 30-year yields climbed to above 5% in just 2 days the 10-year yield had jumped by
50 basis points which according to Bessence Maths sounds like 500 billion in hypothetical losses for
the US government although I’m not sure that’s how it actually works anyway at the same time the
dollar took a tumble in the foreign exchange markets altogether this painted a picture of some
very big creditors losing financial confidence in the US this time the bond vigilantes were
rumored to be led by America’s biggest creditor Japan although we haven’t seen any evidence for
this whoever it was though the last thing the US needed a top a global trade war and a stock market
meltdown was a debt crisis but that appeared to be the direction of travel now US Treasury debt is
the bedrock of the global financial system and if there’s one thing that the US cannot tolerate it’s
the prospect of investors no longer wanting to buy it the last time bonds sold off this quickly was
the beginning of the pandemic when the Federal Reserve had to step in to rescue the market this
time the fire sale was invited not by a mysterious virus but by executive order which is arguably
a much worse look for the US specifically the economist Adam Tus who wrote a book about the
Fed’s interventions in 2020 described the new bond market route as quote the script for a truly
existential financial crisis well then so much for debt refinancing 4D chess let’s put that theory
to bed until further notice apologies for the that Washington woke up to a bond market rebellion
on the 9th of April at 9:37 a.m President Trump advised his followers on Truth Social that quote
“This is a great time to buy DJT.” Now what was he trying to tell us well the jury is out but at
1:18 p.m Trump announced a 90-day partial reprieve on tariffs for every country except China Canada
and Mexico this ignited a ferocious market rally that saw the Dow up 8% the S&P up 9.5% and the
Nasdaq up 12% its biggest daily gain in 24 years btc bounced 8.3% the president’s own company whose
stock market ticker is DJT rallied by 21.6% that day inflating Trump’s net worth by around $400
million not long after a video surfaced of Trump having a chuckle in the Oval Office with a group
of business executives in the video he points at two of the men and says quote “He made 2.5 billion
today and he made 900 million that’s not bad.” Several Democratic Party politicians then raised
suspicions of insider trading in the president’s inner circle and asked the Office of Government
Ethics to launch an urgent inquiry as far as we can tell though legal action is unlikely to
go anywhere unless someone in Trump’s inner circle has knowledge of the president giving
someone advanced notice of his tariff pause and that person being motivated by this information to
make illegal trades there’s no way to prove beyond reasonable doubt that insider trading took place
insider trading is very hard to prove in the US and to be sure we haven’t seen evidence that
it took place at all as for the Truth Social Post meanwhile there’s nothing illegal about
publicly sharing vague financial advice to nobody in particular so until further notice it
was just another episode that recalled that one White House officials comment about Trump being
at quote peak not giving a [ __ ] anyway Trump’s partial recall of Liberation Day was widely
celebrated critics gave a sigh of relief and supporters declared victory in the latter camp
Shaun Hannity called the pause quote the art of the deal and quote a huge win for the president
his biggest accomplishment of the second term jesse Waters said quote Trump created maximum
leverage for himself laura Ingraham called it quote Trump’s 3D chess move which seems a little
low but well we respect the sober analysis but amidst the chorus of praise on Fox News one
analyst broke ranks business correspondent Charlie Gasparino said quote “I want to tell you
right now that Donald Trump outsmarted the world trust me I’m an American i support my president.”
But that’s not really what happened here from what I understand if you have a mass sale of bonds
that means people are losing confidence in the US economy on the ability to do deals with us
and from what I understand this is what forced the hand of this 90-day reprieve it is the White
House who capitulated now Trump had admitted on the day of the pause that he reversed because
people quote were getting a little bit yippy a little bit afraid he added quote “The bond market
is very tricky i was watching it but if you look at it now it’s beautiful the bond market right now
is beautiful i saw last night where people were getting a little queasy.” Now one of the biggest
takeaways from all this is that the Trump put is alive and well this is the idea that Trump can
be relied on to U-turn if stocks or bonds react poorly to his policies investors came to rely
on the Trump put during his first term but it was feared missing this year after Trump stuck to
his guns in Q1 against plunging markets secretary Bessant insisted in March quote there’s no put and
yet here it is in 2025 the Trump put is the bond market and based on recent events the strike is
when yields on the 10-year Treasury rise 50 basis points in 48 hours good to know for investors and
we dare say good to know for countries who hold large amounts of US treasuries and need a source
of leverage in a trade war with Washington and while we’re on the topic China holds somewhere
between 700 and $900 billion in US treasuries and around 3 trillion USD in cash reserves of
course dumping significant branches of these holdings quickly is a nuclear option that would
have severe consequences for the US dollar but this is unlikely because it would devalue China’s
remaining reserves of US dollar assets and that’s certainly not in China’s interests however a slow
dumping is more plausible and with China being the second largest holder of US bonds there is always
the option of causing trouble for the US Treasury market and there was plenty of drama unfolding
outside of the bond market too also on the 9th of April China responded to Trump’s 104% tariff
rate by raising its own tariff on US imports to 84% but confusingly this announcement seems
to have been made at around the same time as Trump’s tariff pause announcement which also
included another China tariff hike to 125% by the look of it Trump’s hike from 104% to 125%
wasn’t even retaliatory he just threw it in there because you know you need a little stick to make
up for the carrots that everyone else is getting the White House then tweeted in all caps quote
“Do not retaliate and you will be rewarded.” But the next day China matched the 125% rate added
more export bans and sanctioned more US companies trump then clarified that his tariff rate was
actually 145% now because of the fentinel inspired 20% levy he introduced earlier this year this
means that Trump has had the last laugh for now because China has called his government’s actions
a quote joke and said it no longer considers them worth matching as China’s foreign ministry put
it quote “Given that American goods are no longer marketable in China under the current tariff
rates if the US further raises tariffs on Chinese exports China will disregard such measures indeed
tariffs this high are likely to halt most of the $700 billion in trade that China and the US would
otherwise be conducting this year.” per Bloomberg each side will be trying to secure alternative
supply chains but there will be certain imports that are hard to replace and this appears to be
the case with electronics from China after Trump settled on a 145% tariff US customs and border
protection announced that smartphones laptops semiconductor devices solar cells flash drives and
other tech products from China would be exempted from tariffs introduced since liberation day these
abrupt exemptions cover almost a quarter of US imports from China and were made unilaterally
without Beijing having made any concessions trump and Commerce Secretary Howard Lutnik
have since said that Chinese electronics will later be subject to other semiconductor related
tariffs but these have yet to be announced at the time of making this video as it stands then the
exemptions seem to have undermined for example Lutnik’s insistence that iPhones will be made
in the USA some 90% of iPhones and 80% of Apple products overall are made in China and they would
cost considerably more to make in the US no wonder then that this exemption has been interpreted
as Trump doing Tim Cook Jensen Hang and the US consumer a solid the exempted products are still
subject to tariffs introduced prior to the 2nd of April by President Trump and President Biden
before him but this is still a big improvement over 145% it’s also an acknowledgement that there
are some imports that can’t be easily substituted by buying or building American and this strikes at
the question that decided the outcome of Trump’s first trade war in the 2010s which country
needs the others exports more back then as now the largest share of US exports to China was
taken up by agricultural products the problem is lots of other countries grow the same crops so
when the US launched the first trade war China simply started shopping elsewhere this caused US
oil seed and grain exports to China and associated American jobs to fall by 70% from 2017 to 2018
washington came under immense pressure from the influential farming lobby and the result was a
Trump put par excalance as the US capitulated and sought negotiations to have China turn the
taps back on china agreed and has been buying US agricultural exports ever since or at least it
was until liberation day that is this time around china already has alternative supply chains for
agricultural imports ready to go but US farmers are still dependent on China as their largest
export market it’s not clear then how they’ll survive this time around meanwhile China dominates
the global supply of rare earth metals which are needed in most advanced technologies and wouldn’t
you know it Beijing has been turning off the taps again many critical minerals and rare earth metals
are now subject to US export bans in retaliation for the Biden Trump tariffs on Chinese goods
suffice to say it’s harder to secure alternative supply chains for rare earth metals than it is
for soybeans the US has shown though that it’s willing to go to extreme lengths to secure access
as this appears to be the motive for the proposed colonization of Canada and Greenland and the rare
earth metals that America can no longer get from China aren’t just for building Tesla batteries
and AI servers the US needs them for weapons production and especially for the development of
next generation fighter jets historically speaking US fighter jet development is prone to delays at
the best of times the current fifth generation F-35 was first conceived in the early90s first
flew in 2006 and finally entered service with the US Air Force in 2016 and the Navy in 2019 this
was despite the ready availability of rare earth metals from China during this period recent
announcements indicate that Boeing has been awarded a contract to develop a sixth generation
fighter jet expected to enter service sometime in the 2030s it’s not clear though if this ambitious
timeline has accounted for any material supply shocks but as China is already flying prototypes
of its own sixth generation fighters it’s no wonder Washington is prepared to take such
drastic measures to develop new supply chains and at the time of making this video the White
House just announced that it will look into putting tariffs on imports of Chinese rare earth
metals we understand this is a gesture towards Trump’s desire to reduce US dependency on China
but tariffing stuff that is already subject to a US export ban is an interesting strategy
nonetheless for the time being President Trump is waiting for a call from President
Shei who is giving him the silent treatment it’s a tense standoff for sure but it certainly
beats the period of daily escalation that we saw earlier this month so what will happen next dant
capitulation victory well we can only guess but frankly making predictions in the current climate
is hazardous volatility is the only thing that’s promised in these conditions so if the state of
the market is eating away at you just take a deep breath and remember that old American proverb
one BTC equals one BTC uh it’s equal anyway while you’re waiting for all of this to blow
over why not watch this video to find out why some people fear a war over Taiwan is coming
in 2027 okay that’s all from me for now though as always thank you for watching and I’ll
see you next time this is Guy over and out
