00:00 Speaker A
The US dollar has been a global benchmark for decades, but President Trump could be stirring up some trouble for the currency. And Yahoo Finance’s senior columnist, Rick Newman, joins us now with more. Rick.
00:16 Rick Newman
Hey guys, when Donald Trump says America First, does anybody think that means devaluing the dollar and investors around the world selling US assets, including stocks and bonds both at the same time? Which is contrary to, uh, decades of historical trends. I don’t think that, but, uh, that is what has been happening and, uh, this is, uh, generating some alarm among investors who see, uh, you know, when, uh, when, when there’s a big stock sell off, as we’ve seen recently. Of course, we’ve had a few rebound days, but overall, we were still way down. Uh, what normally happens is, uh, people buy US treasury bonds and long-term interest rates go down, and we’ve been seeing the opposite. People have, we think, have been selling US treasury securities, which is pushing interest rates up. That is not what normally happens. So you’re starting to see some analysis mean that the bond market, it’s not like it’s a monolith, it’s it’s not like bond investors are always doing the same thing for the same reasons. But analysts are starting to read into this that, uh, the US is just beginning to look like a less desirable investing climate and investors are saying, this is going to be an uncertain investing climate for as long as Donald Trump is in office. And there are other things we can do. Gold is getting a lot of interest obviously. Um, central banks and other countries, uh, don’t want to hold as much US treasury securities anymore. And if this trend persists, this is a really big deal because, uh, to remind everybody, we have a gigantic federal debt in the United States and it’s only going to get bigger with Trump, uh, pushing for deficit finance tax cuts, which is just going to mean we need more treasury debt on the market. And if the appetite for that debt is declining, that can only mean interest rates have to go up, which would be basically bad for everybody. So, uh, you know, Trump’s trade war, it just gets worse every week, and every Friday I come on and try to summarize what’s happening, and it’s basically turning into a disaster.
04:17 Speaker B
Um, Rick, how will we know if indeed that foreign appetite for US assets is is declining? I mean there’s been some speculation that that’s one of the things that’s been driving what’s going on in the treasury market, but we don’t know for sure.
04:50 Rick Newman
I I what, uh, investors seem to hope happens is that Trump gets the message and he says, okay, I cannot mess with the bond market, uh, because I will lose and he will lose. And of course we saw a hint of that on Wednesday, April 9th, when Trump delayed the so-called reciprocal tariffs. But at the same time, Trump, uh, Trump put the tariff on Chinese imports all the way up to 145%. That is absurdly high. That tariff on Chinese imports is so high that some trade experts say Chinese ships won’t even leave ports. No one will even buy those goods, uh, until they because they’re going to wait and see does something happen, what is the next shoe to drop here. And it turns out that by getting rid of one set of tariffs, but putting the other ones on China so high, we still end up with an average tariff rate of around 27%. That’s 10 times higher. The tax on imports is now 10 times higher than it was, uh, when Trump took office barely, uh, two, two months ago. So and investors are hoping that Trump will say I’m I’m not going to mess with this, but Trump seems to be, uh, sort of dabbling to see how much how much he can get away with, and he’s obviously willing to tolerate some losses among us, among regular people, not among himself, I guess. Uh, and the question is how far will he go? And that I think that is part of the process of losing confidence, which is that, uh, adverse reactions in markets have not had very much impact on Trump so far. And this could become a self-fulfilling prophecy if it continues.
07:47 Speaker B
Rick, thank you. Good to see you.
07:50 Rick Newman
Bye guys.
