The ‘dumbest trade war’ of history

Show notes

Monday was rough across global financial markets. Mood is better this morning but intraday volatility is at levels not seen since the Covid-era selloff as we’re facing an avalanche of headlines: who’s ready to negotiate, who’s not, what did Trump say, what did he mean… it’s nearly impossible to predict the next move. US Senator Elizabeth Warren called it the “dumbest trade war” in history, pointing out that this turmoil isn’t caused by a virus or a housing collapse—it’s man-made and potentially fixable by simply rolling back tariffs. For now, Trump stands his ground, while world leaders oscillate between retaliation and negotiation. Meanwhile, big investors, US bank bosses, and even Elon Musk—the First Friend—are voicing criticism. Maybe internal pressure in the US will eventually shift the course.
Of course, the magnitude of this market selloff brings the Federal Reserve (Fed) into the conversation. The central bank is trapped between a rock and a hard place: above-target inflation on one side, rising recession risks on the other.
Bond investors are confused too. Hints of a deal—or even a tariff delay—could spark a risk rebound, leading to a sharp unwinding of dovish Fed bets and renewed selloffs in bonds. BoFA’s MOVE index, which tracks bond market volatility, is surging.
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