Over The Pond – Is Trump Holding a Busted Flush?
Written by Julian Wheeler – Partner and US Equity Specialist
The events of, and since, the absurdly titled ‘Liberation Day’ are so well known that they are part of the evening news programmes. What matters most is that the uncertainty I referenced last month still remains: yes, markets have (for the moment) calmed down a little from their frantic gyrations, but the volatility or ‘fear’ index is still 50% higher than its level a month ago. We continue to wake up each morning to news that would register a huge surprise in other circumstances, but for now passes as everyday fare; tariff exemptions for one sector or country, massive, almost untenable, penalties for another.
These daily changes, alternating between positive and negative for sentiment, have sent the stock market lurching back and forth, up and down like a storm-tossed galleon. But amid this turbulence, one thing has remained constant: the US dollar continues to fall against all other currencies. Why is everyone selling the greenback when it is traditionally viewed as a haven in times of turmoil? It appears that Trump’s poker game is not going well; it looks as if he has been “called” and his hand, once shown, is not so strong after all. If the dollar is the USA’s brand, it is looking tarnished.
In the earliest days of European commerce, merchant traders across the continent would agree deals verbally, before tiresome things like written contracts were introduced. The concept that “my word is my bond” was the standard principle upon which business was conducted. But today it isn’t Trump’s words (although what weight do you give to something that changes daily?) which are being called into question. Rather more sinister than that, it is the American (Treasury) bond that is under suspicion, and doubts are being raised about its value.
We don’t know for sure if some combination of the largest holders of US debt (in order—Japan, China, UK) decided to act in concert to hit back at Trump by selling enough Treasuries to raise yields. However, the price never lies. Someone was indeed selling heavily last week. It has even been speculated that it was Mark Carney, the new Canadian Prime Minister, who was the mastermind behind a coordinated attack on the US bond market. Stung by the huge levies targeted at Canada, he may have used his experience gained as Bank of England Governor to hit the US administration where he knew it would hurt them most: in the pocket! Having quietly shifted Canadian reserves into substantial holdings of US Treasuries over the last few months, he then released them, along with other central banks, exactly in time to make debt more costly, just as the US was conducting its latest sales auction. A simple truth was then revealed: it is extremely hard to use punitive tariffs to put pressure on trading partners when you also owe and depend upon them for a boatload of money. Is that a busted flush for Trump? We shall see.
Within a few days, we saw Trump forced to back-pedal; don’t be fooled by his word “pause” for a second. He has lost this hand. All those ‘reciprocal tariffs’ that so shocked the market for a few days and would have ensured a global recession have now been suspended. The market is now betting that they won’t come back and has allowed equities to recover some poise. Trump may suggest that this was all a negotiation ploy, but in reality, it is a proper climbdown. While the architect of this policy, “Tariff Tsar” Peter Navarro, may take the fall, thus confirming its failure, the damage to the currency and the perception of the US economy may last longer.
According to a recent Bank of America Global Research survey, global investors have significantly reduced their U.S. stock holdings at a record pace over the past two months. A net 36% of fund managers are underweight on U.S. equities, marking a sharp 53 percentage point decline since February—the steepest on record.[1]
With sentiment this negative, entering a corporate earnings season with strong current numbers, in the short term we may continue to recover some of the early-month losses. This strength is illusory. In March 2025, Apple airlifted a record $2 billion worth of iPhones from India to the United States in a strategic move to avoid impending tariffs under President Donald Trump’s trade policies. The company’s key Indian suppliers, Foxconn and Tata Electronics significantly ramped up exports to meet demand. Foxconn alone shipped $1.31 billion worth of iPhones—its highest-ever for a single month—contributing to its total of $5.3 billion in U.S. shipments for the year. Tata Electronics exported $612 million worth, a 63% increase from the previous month, including newer iPhone models. Apple used at least six cargo jets from Chennai to various U.S. cities, notably Chicago, and successfully lobbied Indian authorities to expedite customs clearance times.[2] This large-scale airlift operation was designed to mitigate the effects of new U.S. tariffs, which imposed a 26% duty on Indian imports in April, significantly lower than the over 100% duties previously applied to Chinese goods. Although some tariff exemptions have since been granted, these may only be temporary.
With an investment landscape that changes daily, it is hardly surprising to see a continued exodus of foreign investors, which would also explain the weakness in the dollar. If this is part of Trump’s grand plan to balance the budget deficit, increase US exports and reset the global economy… then we have a lot further to go.
[1]Reuters: Global investors dump US stocks at record pace, BofA survey says
[2] Reuters: Apple airlifted iPhones worth a record $2 billion from India in March as Trump tariffs loomed
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