In April 2025, President Donald Trump's sweeping tariffs, dubbed "Liberation Day," have triggered significant financial turmoil. The U.S. dollar has declined over 1% against a basket of currencies, reaching its lowest level in three years and extending a nearly 10% drop since the beginning of the year. This rare simultaneous drop in U.S. equities, Treasury bonds, and the dollar raises concerns about the dollar’s role as the world’s reserve currency.
The bond market has experienced significant volatility, with the 10-year Treasury yield spiking from 4.20% to 4.43% in just four days the fastest climb since 2008. The 30-year yield saw its sharpest three-day gain since 1982. This selloff is attributed to broader inflation fears, global political tensions, and skepticism about U.S. fiscal policy.
Global investors are increasingly concerned about the unpredictability of U.S. economic policies. The dollar's share in global reserves has been decreasing, with countries like Japan showing diminishing confidence in U.S. Treasury bonds. Gold prices have soared as investors seek alternatives, and there is a growing sentiment that the U.S. could be nearing or already in a recession triggered by policy unpredictability.
Economists warn that these developments could lead to a structural reassessment of the dollar’s role as the world’s reserve currency. The crisis could deepen if markets continue to view U.S. policies as erratic, potentially tipping the economy into recession.
As the situation unfolds, the global financial community watches closely, assessing the long-term implications of the U.S.'s current economic strategies.