The Stocks Crash
Since the president of the United States of America, Donald Trump, took office in January 2025, the American stock markets have shed a whopping 20%, just 3 months later. One of the market's most dramatic performances in recent memory was witnessed in the first week of April where the likes of the S&P 500 plummeted 8.3%, shedding 421 points to close at 4,659, while the Dow Jones Industrial Average haemorrhaged an astonishing 2,900 points in a single session.
Some analysts were quick to label it as another “bubble bursting,” pointing fingers at inflated tech valuations and greedy speculators. A deeper look may debunk that, however. What if this wasn’t just Wall Street’s hubris meeting its inevitable reckoning? What if the crash - timed with eerie precision to be coincidental - was less about overvaluation and more about Mr. Trump’s administration spooking those equity dollars then corralling them towards the welcoming arms of the U.S. Treasury?
Economic Context and Debt
Let’s rewind for context. By March 31, 2025, America’s national debt had ballooned to $36.2 trillion - a figure so staggering that even seasoned economists struggled to comprehend its implications. Against this backdrop, Q1 GDP growth limped along at an annualised rate of just 1.8% (Atlanta Fed), painting a picture of tepid economic momentum.
Meanwhile, Treasury yields spiked dramatically: the 10-year yields surged in the same week equities ebbed, from 4.2% to 4.65% within a few days. Coincidence? Hardly. Investors bolted for safety, yanking $48 billion from equity funds by the 4th of April (Bank of America). And where did all that money go? You guessed it, into Treasuries, naturally. Short-term T-bills, offering mouth watering yields of 5.1%, absorbed $28 billion, while 30-year bonds lured $24 billion in inflows in just seven days (Treasury data).
Flight-to-Safety and Federal Reserve Benefits
This phenomenon is often called a “flight-to-safety.” But who exactly benefits most from such flights? The federal government of course. So when it is cornered, mired in debts around 127% of GDP, staring down a projected $1.9 trillion deficit for 2025 (CBO, January), suddenly should we applaud their sudden good fortune with this inflow? Especially when the main driver is the government’s culpable action by introducing tariffs that are threatening higher cost of doing business? But we will discuss those tariffs in a bit.
For now suffices to mention that their consequences may have been anticipated – perhaps hoped for really - considering the benefits thus far to The Federal Reserve (Fed), which has found itself basking in the glow of oversubscribed auctions.
Its $44 billion 10-year note sale saw bid-to-cover ratios climb to 2.9, up sharply from 2.4 in March. By April 4th, yields eased back to 4.55%, saving taxpayers $2 billion annually on that $1.9 trillion new debt issuance. Convenient, no?
Now let’s ask the uncomfortable question: Who’s grinning behind the curtain? The Federal Reserve, comfortably parked at its target interest range of 5.25%-5.5% since March 19 (FOMC), didn’t flinch - not a single rate cut, not even a hint of panic. One would expect with blood flowing down Wall Street alley, we would have seen some cuts in interest rates to release the tension and perhaps stabilise the equities downward pressures.
This then buttresses the notion that where the markets’ losses are the Fed’s gain, this Trump administration will choose “public” over “private" any day. Why wouldn’t they, they ran on this mantra to “Make America Great Again” didn't they? What else did private capital and global players expect?
So, as a consequence, the U.S. Treasury market capitalisation has since swelled by $3.1 trillion (Bloomberg) while equities collectively shed the same amount in value. Coincidence? Pension funds piled 12% more into T-bills, endowments locked into 30-year paper, as Nasdaq volatility surged 18% (VIX). Suddenly, the administration’s $1.5 trillion discretionary spending binge (OMB, FY 2025) doesn’t feel quite so suffocating when $1.2 trillion in interest payments become marginally less burdensome.
Isn’t it curious how this “market accident” props up a debt-to-GDP ratio already teetering at 127% (IMF)? Did someone nudge it along? Margin debt hit $950 billion by March 31 (NYSE), surging 25% year-over-year. Did the Securities Exchange Commission simply wink at such leverage - or worse, encourage it? No smoking gun implicates Washington directly, but does anyone really believe they minded? When $52 billion floods federal paper, easing the strain on a $36.2 trillion sovereign debt tab, you don’t cry over spilt equity milk do you?
This isn’t the first time fiscal woes have driven "creative" solutions. Since 2008’s quantitative easing bonanza, U.S. federal debt ballooned from $10 trillion to $28 trillion by Biden’s 2021 inauguration (Treasury records), peaking at $36.2 trillion under his watch - a sobering addition of $8 trillion fuelled largely by $6 trillion in COVID-era stimulus and $1.7 trillion in omnibus spending (OMB, 2023). Enter Donald Trump, re-elected in 2024, inheriting this fiscal mess. Could this crash represent his two-pronged strategy?
Trump's Economic Strategy and Tariffs
Let’s talk about those tariffs now.
First, they are NOT “reciprocal.” The White House may be saying that President Trump is implementing reciprocal tariffs, meaning he’s putting tariffs on countries at the same rate that they apply them on the USA. However, quoted tariffs values from other countries are NOT actually tariffs that they put on USA imports. The figures are actually “trade deficits"!
The formula they used was; Total annual trade deficit with a country, divided by the USA imports from that country in that period, multiplied by a 100. To give an example, the Trump administration has claimed that Madagascar has a 93% tariff on American goods going into the African country. Which is NOT true as Madagascar levies tariff rates on imports from the United States at a range of 5% to 20%, depending on the type of product. That 93% number is really derived from the American trade deficit with Madagascar, divided by imports into USA from Madagascar.
Madagascar is a huge exporter of vanilla and spices. As the richest country in the world, the USA is naturally going to buy a lot of vanilla and spices from Madagascar, which happens to be very poor, hence it will in turn import less from the USA than they’re exporting to them, resulting in a trade deficit skewed in Madagascar's favour. By the same token, the USA is therefore going to be in a lot of trade deficits with many other countries, especially smaller ones, because the America is the richest country in the world.
Secondly, using this trade deficit formula (not "reciprocal tariffs") as they did, means its less about reciprocity than it is about Trump reengineering American domestic economy - encouraging domestic industry growth (manufacturing and consumption), increasing the tax base through the tariffs, spooking private capital into Fed paper, and, dare I say, deliberately pressuring the US dollar value dowwards, as I’ll explain later.
The US does NOT have a revenue problem, but a spending problem, because revenues are averaging around 20% of USA GDP. Previous administrations have consistently spent an average 4% above revenue. The the average Fed spend under President Biden, for instance, over his five fiscal years (2021–2025) is approximately 24.7% of GDP. Thankfully the US dollar is a global reserve currency and trade currency of choice globally meaning it’s more global economics stabilising domestic inflation at around 2% than domestic thrift.
Enter Trumpenomics.
Warren Buffett has been quoted as saying, "Trump is making the best economic moves he’s seen in over 50 years." He may have been referring to the secret game Trump is playing, which will push cash into treasuries, which in turn forces the Fed to slash interest rates (tomorrow 7 May expect rate cuts), then those lower rates will defend the ability to refinance trillions of debt very inexpensively for the USA government.
By my projection, the dollar under Trump may be “allowed” to depreciate by between 15% and 25% by December 2025.
Global Implications
For countries like Zimbabwe, Panama, and Ecuador, which use the USD as legal tender domestically, a weaker dollar would deliver a harsh economic blow. Zimbabwe, for instance, having dollarised in 2009 to curb hyperinflation, imports most goods - fuel, food, machinery - at dollar denominated prices. A devalued USD would slash purchasing power, making these imports costlier in real terms and reigniting inflationary pressures, especially since local wages and savings are fixed to the dollar exchange rate.
With no control over U.S. monetary policy, these nations are at the mercy of Federal Reserve decisions or Trump-driven economic shifts. A weaker dollar might boost U.S. exports under Trump’s vision, but for Zimbabweans, it could mean $10 buying less bread or fuel, deepening poverty in an economy already lean on domestic production. This tension highlights a paradox: Trump’s America-first strategy could inadvertently export economic hardship to dollar-dependent foes and allies alike.
Which all speak to my conviction, against popular opinion, that Zimbabwe must ditch the dollar and support their local ZiG currency to the hilt. But that is a whole other discussion which we will have at the appropriate time.
Meanwhile, in America, a weaker dollar, coupled with the import tariffs, will make imports prohibitively expensive for Americans, which theoretically discourages imported products flooding the local market, and by extension stimulates local production and consumption that’ll cover the gap affordably, creating local jobs in the process, as well as growing revenues further through a wider taxes and levies base.
For instance, farmers will necessarily sell more of their products in the US, bringing grocery prices down. We’ve already seen this with eggs and beef being sold more in the domestic market and replenishing shelves and fridges after they had become scarce as farmers favoured exporting.
The erstwhile fear that a weaker dollar raises the cost of imported oil, which could fuel inflation, is no longer existent as the USA is now the largest oil and natural gas reproducer globally.
The U.S. produced about 21.9 million barrels per day (b.p/d) in 2023, a world leading 22% share of the world’s total, compared to Saudi Arabia’s 11% and Russia’s 11% as well. The U.S. dry natural gas production reached approximately 1.03 trillion cubic meters (Tcm), or 36.4 trillion cubic feet (Tcf), per EIA data, in 2023. This continues a trend since the U.S. has overtaken Russia to claim the number one rank in gas production too. This has given Trump wiggle room to motivate US dollar value downwards for local benefits.
There are those who argue that America no longer needs a manufacturing base in its economy - that it's an outdated sector, and the U.S. can comfortably rely on technology and emerging industries, like tech. and AI to drive growth. But the real question is: Does America want to stake its entire economic future on an undiversified economy?
Just as a prudent investor wouldn't put all their capital into one or two stocks, a healthy economy shouldn't be overly dependent on a narrow list of industries. Diversification is essential, not just in portfolios but in national economic strategy. And this seems to be the underlying fundamental for Trump, creating an affordability domestic base, regardless whom else it offends. Think the way this administration does not consider global carbon emission standards, for illustration.
A shift toward a narrowly concentrated economy, as preceding administrations favoured, heavily reliant on tech – left that country vulnerable. We've seen how this plays out: in the dot-com crash of 2000, when overexposure to specific sectors magnified the damage and led to a drawn-out bear market and long-lasting carnage.
On the other hand, a robust manufacturing base provides balance, resilience, and stability. Abandoning it completely risks creating an economy that is dynamic - but dangerously fragile. AI provides opportunities, but it is also accelerating the trajectory of narrowly based structure and adding to the risks.
Tough decisions are rarely celebrated in real time. Especially in the political and economics arena. They're often unpopular, uncomfortable, and met with skepticism. It's only in hindsight, after they succeed, that they’re recognised as bold or necessary. The short-termism fostered by political 5 year presidential terms is quite incongruous with longer term planning necessary for long lasting economic stability.
Perhaps because this is Trump’s second term, he may instead be impervious to criticism as he may not necessarily pander to the whims and caprices of the wealthy, as he does not need to win any future presidential votes, therefore may be the first modern American president making economic plans whose positive impact will be felt long after he has vacated the oval office.
Conclusion
The tariffs President Trump is implementing aim to address several structural challenges - chief among them, revitalising America’s manufacturing base, the tariff formula not withstanding. Agree or disagree with the policy or how it's being implemented, it stands as one of the most decisive and courageous economic moves made by a U.S. President in recent history. And for the sake of his country, I hope he is successful.
Also, bear in mind 94% of all stocks are owned only by 8% of Americans, so the Trump administration is taking from the rich short term and handing over to the middle class through lower prices, while benefiting the poor by fixing American debt, which the poor would have had to bear via incessantly higher taxes. Yet still there are even murmurs of possible individual income tax lowering. All good for the not so well healed Americans. With the Fed inclined to cut rates, that also drops mortgage rates in the real estate market, a key sector especially now with a spooked stock market.
Granted, all this is unpalatable for the rest of us outside America, as what is "Making America Great Again" is not necessarily covering the rest of the countries in sunshine and rainbows. In a sense, Trump is more an American president, while the world had seen his office, through predecessor precedence. as a global leader position whose mandate extends beyond just American welfare but also global.
Is he wrong? Depends on which side of the American borders you reside.
Whether the U.S. stock market crash we are witnessing is tied to broader market dynamics or a stealthy Federal Reserve move to force a weaker dollar, stimulate local production, prompt rate cuts, and motivate a more affordable federal debt refinancing, remains a matter of conjecture. The evidence, and accruing state benefits, point too positively to be coincidental, hinting at intentional possibilities, but the jury is still out as evidence stays murky.