In new week, ‘Sell US’ trade continues to gather momentum, investors’ mood keeps darkening: here’re 8 reasons why
All benchmark stock market indices in the United States — the S&P 500, NASDAQ 100, Dow Jones Industrial Average, and Russell 2000 — fell between 2% and 2.5% on April 21, even as investors sold US government bonds, and the US dollar continued to weaken against all its traditional peers such as the euro, the Japanese yen, the Swiss franc, and the British pound.
In essence, investor confidence in the management of the US economy continues to plummet. That is why they are either selling shares (if they are in the stock market) or selling US government bonds (if they are in bond markets).
So why did the slide in markets continue after the Easter weekend? Here are eight clear reasons.
1. Trump’s proposed trade deals appear elusive
When President Donald Trump announced a 90-day pause to his prohibitive reciprocal tariffs, the hope was that the US will arrive at new trade agreements with most key trading allies soon.
However, despite many positive noises from inside the White House, no country is close to signing a deal with the US. Japan was the first in line in terms of negotiations but, as Reuters has reported, Japanese Prime Minister Shigeru Ishiba has “grave concern” about the US’s approach towards tariffs on automobiles.
Sealing a deal quickly with one of the major trading partners can boost investor confidence, many of whom are starting to wonder if America has the ability to actually deliver on the boasts of its self-declared dealmaker President. The window is only 90 days, and historically any trade deal takes multiple years to conclude.
2. Non-tariff barriers are muddying the waters
Trump started with what appeared to be a simple and intuitively appealing idea: reciprocal tariffs. Simply put, the US will charge a particular country the same tariff that that country charges the US. In this setting, it was easy to imagine a scenario where Trump forces every country to lower their tariffs and promote overall trade in the world.
However, neither were the “reciprocal tariffs” calculated in that manner nor is Trump’s angst limited to trade tariffs alone. Increasingly, non-tariff barriers are gaining prominence.
On Monday Trump posted the following on Truth Social:
“NON-TARIFF CHEATING:
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1. Currency Manipulation
2. VATs which act as tariffs and export subsidies
3. Dumping Below Cost
4. Export Subsidies and Other Govt. Subsidies
5. Protective Agricultural Standards (e.g., no genetically engineered corn in EU)
6. Protective Technical Standards (Japan’s bowling ball test)
7. Counterfeiting, Piracy, and IP Theft (Over $1 trillion a year)
8. Transshipping to EVADE Tariffs!!!”
According to the World Trade Organization (WTO), non-tariff barriers are essentially “various bureaucratic or legal issues that could involve hindrances to trade”.
For instance, a country could have low tariffs on goods coming from the US but could impose sanitary or health standards that US goods are unable to meet.
3. Tariffs are starting to hurt American consumers
With each passing day, Trump’s exorbitant tariffs are beginning to raise prices for goods in the US, irking many American consumers, including those who voted for Trump, reporting in the American media is increasingly showing.
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4. China isn’t blinking, has fired another warning shot
The New York Times reported that “the Chinese government on Monday warned other countries against curbing trade with China in order to win a reprieve from American tariffs, promising to retaliate against countries that do so.”
5. Trump is continuing to attack on US Federal Reserve Chairman Jay Powell, undermining the central bank
Picking off from where he left last week, the US President called Chair Powell “a major loser” for not cutting interest rates quickly.
Trump also suggested, again, that the US Fed under Powell had cut interest rates in the run up to the presidential elections in November 2024 “in order to help Sleepy Joe Biden, later Kamala, get elected”.
Over the weekend, one of Trump’s key advisers on the economy, Kevin Hassett, reportedly said that the White House was “studying ways to fire Powell”.
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Trump’s renewed attack on Powell has spooked the markets. Many investors are wondering if the US (and the US dollar) any longer deserves the blind trust it has enjoyed over the past many decades.
6. Trump himself has hinted at a coming slowdown
In the same social media post, Trump attempted to get ahead of the blame game and stated there can be a slowing of the US economy if Powell did not cut rates soon.
‘“Preemptive Cuts” in Interest Rates are being called for by many. With Energy Costs way down, food prices (including Biden’s egg disaster!) substantially lower, and most other “things” trending down, there is virtually No Inflation. With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW.”
7. Poor corporate earnings declaration by tech companies
According to a Bloomberg analysis, as many as 65% of the US companies that have revealed their quarterly earnings for the first quarter (Q1 or January February March) have missed their sales growth targets.
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In other words, even before the full effect of Trump’s tariffs on domestic consumption came into play, companies were already starting to struggle.
8. Overly exalted stock market valuation in the US
The year 2025 started with soaring investor sentiment and trust in US stock market valuations. As such, in the absence of a stable policy regime, the markets have shed a lot of optimism as they factor in the growing possibility of a recession in the US.