In the year 2025, the escalation of the trade war between the US and China caused market turmoil: US Treasury bonds plummeted, bond yields soared, and the stock market and the dollar both fell.

Taiwan • Business • 04/09 10:11
In the year 2025, the escalation of the trade war between the US and China caused market turmoil: US Treasury bonds plummeted, bond yields soared, and the stock market and the dollar both fell.

On April 9, 2025, the trade war between the US and China escalated as the United States imposed a 104% tariff on goods from China, and China responded with an 84% retaliatory tariff, leading to turmoil in global financial markets. The US Treasury market experienced a sell-off, with the 10-year Treasury yield breaking past 4.5% and the 30-year surpassing 5%, marking the largest three-day rise since 1982. US stocks and the dollar both declined, and hedge funds unwinding high-leverage basis trades triggered a bond market crash, spreading panic to global bond markets and safe-haven assets. The demand for US Treasuries weakened, and market confidence took a hit.

Key Updates

04/09 14:43

The Trump administration imposed a 32% tariff on goods from Taiwan, devastating the export industry.

On April 9, 2025, the Trump Administration imposed a 32% tariff on Taiwanese goods, severely affecting Taiwan's export economy, particularly the traditional manufacturing and information and communication technology (ICT) industries. Pre-orders for the Nintendo Switch 2 were delayed due to U.S. tariff policies, with sales estimates revised down to 15 million units from previous projections, priced at $449.99 and scheduled for release on June 5. This event highlights the disruptions in the global supply chain.

04/09 14:11

US-China Trade War Escalates: Trump Announces 104% Tariff Increase, China Responds, European Economic Forecast Revised Downward, Swiss Watch Exports Affected

On April 9, 2025, U.S. President Donald Trump announced a 104% tariff on all Chinese imports, and China retaliated by increasing tariffs on U.S. goods to 84%. This action impacted the global economy, as Italy and Spain consider lowering their economic growth forecasts, and Swiss watch exports suffering. Italian Prime Minister Giorgia Meloni plans to visit the U.S. on April 17 to meet with Trump to seek ways to ease trade tensions. The U.S. has already initiated trade negotiations with multiple countries to try to resolve the trade conflict.

04/09 13:13

Trump's announcement of a tariff policy has caused market turbulence, but individual investors are still holding firm in the market.

On April 2, President Trump of the United States announced the imposition of "reciprocal tariffs" on multiple countries worldwide, which caused turmoil in the financial markets, leading to the S&P 500 index dropping by more than 12%. Despite this, many wealth management firms noted that most individual investors stayed in the market, and no large-scale sell-off was observed, particularly noting that young investors seized the opportunity to increase their investments. Advisors suggest increasing cash allocations to manage uncertainty and to avoid emotional trading.

04/09 11:38

Impact of US Tariff Policy on the Display Industry: Increased Pressure to Restructure Asian Supply Chains, Rising AMOLED Materials Costs

On April 9, 2025, the United States implemented a reciprocal tariffs policy, impacting the global supply chain and hitting the display industry. A TrendForce report indicates that optical films and AMOLED materials for displays are being taxed, putting pressure on the Asian supply chain to restructure. China imposed a 34% tariff on U.S. goods, impacting U.S. suppliers' exports to China. The end market might see a drop in demand for TVs and laptops due to increased costs and falling consumer confidence.

04/09 10:42

Due to tariffs, iPhone prices in the U.S. may increase by 12% to 43%, leading to a consumer buying spree.

On April 9, 2025, President Trump of the United States imposed a 104% tariff on Chinese imports, creating cost pressures for Apple Inc. If Apple decides to pass these costs onto consumers, iPhone prices could increase by 12% to 43%, with some high-end models seeing an increase of up to $350. This policy has sparked a buying frenzy among American consumers, resulting in a surge of crowds at Apple stores. Apple has yet to announce any price adjustments, but it may absorb some costs and pressure suppliers to reduce prices to maintain its profit margins. If the tariffs continue, price adjustments might become unavoidable.

04/09 10:11

In the year 2025, the escalation of the trade war between the US and China caused market turmoil: US Treasury bonds plummeted, bond yields soared, and the stock market and the dollar both fell.

On April 9, 2025, the trade war between the US and China escalated as the United States imposed a 104% tariff on goods from China, and China responded with an 84% retaliatory tariff, leading to turmoil in global financial markets. The US Treasury market experienced a sell-off, with the 10-year Treasury yield breaking past 4.5% and the 30-year surpassing 5%, marking the largest three-day rise since 1982. US stocks and the dollar both declined, and hedge funds unwinding high-leverage basis trades triggered a bond market crash, spreading panic to global bond markets and safe-haven assets. The demand for US Treasuries weakened, and market confidence took a hit.

04/09 09:09

China Publishes White Paper on China-US Economic and Trade Relations: Criticizes US Unilateral Policy, Urges Dialogue to Resolve Disputes

On April 9, 2025, China's State Council Information Office released a white paper titled "China's Stance on Various Issues in China-U.S. Economic and Trade Relations," criticizing the United States for its unilateral and protectionist measures, accusing it of violating international trade rules and disrupting the economic and trade relations between China and the U.S. China reiterated that the economic and trade relations between China and the U.S. are mutually beneficial and urged the U.S. to resolve differences through dialogue on equal terms, and stated that if the U.S. escalates its restrictive measures, China will respond with countermeasures.

04/09 09:09

Trump's New 2025 Tariff Policy Sparks Global Business Community Backlash: Emerging Inflation Risks and Logistics Crisis

U.S. President Donald Trump initiated a global reciprocal tariff policy on April 9, 2025, imposing at least a 10% tariff on imported goods, with tariffs on Chinese goods reaching as high as 104%. This move has triggered global market turmoil, with Wall Street business leaders, such as JPMorgan Chase CEO Jamie Dimon, opposing it and warning of risks such as inflation and investment stagnation. Taiwanese companies are facing challenges like having their export containers rejected. The UK, Japan, Vietnam, India, and Cambodia might quickly reach tariff agreements, which could potentially benefit companies like Nike.

04/09 09:09

Impact of US Tariff Policy on Taiwan: 11 Products Could See Price Increases, Sock Industry Calls for Government Subsidies

On April 9, 2025, U.S. President Donald Trump imposed a 104% tariff on Chinese goods and a 32% tariff on goods from Taiwan and other countries, impacting Taiwan's export and retail sectors. Costco's Taiwan branch is under pressure to raise prices on 11 items, and sock manufacturers in Changhua have been notified by American clients to halt shipments, calling on the government to negotiate tax cuts and offer subsidies. The Taiwanese government has assembled a negotiation team to travel to the U.S. for discussions, and the industry is looking forward to concrete relief measures.

04/09 07:13

Trump announced a 104% tariff on Chinese goods, leading to wild fluctuations in US stocks and causing the volatility index to soar.

On April 9, President Trump of the United States imposed a 104% tariff on Chinese imports, causing turmoil in global financial markets. The three major U.S. stock indices experienced significant declines, with Dow Jones Industrial Average futures dropping by 785 points at one point, the S&P 500 index falling 115.5 points, and the Nasdaq 100 index dropping 398 points. Panic in the market intensified, with the VIX index soaring to 52.33, marking its highest level since 2020. Investors moved from optimism to selling, reflecting their concerns over the escalating trade war.

US-China Tariff Standoff Escalates, Shaking Market Confidence

In the early morning of April 9, US President Trump officially implemented a cumulative 104% tariff on Chinese goods, comprising a general 20% tariff, a reciprocal 34% tariff, and a retaliatory 50% tariff. China immediately announced an 84% retaliatory tariff on US goods starting April 10. This tariff standoff quickly triggered global market panic, with investors withdrawing from risk assets, seeking liquidity.

However, unlike in the past, funds did not flow into US Treasury bonds as a safe haven as expected; instead, there was a massive sell-off. Market observers noted that this reflects deep-seated concerns among investors about the stability of US finances and the sustainability of its debt.

Historic Sell-off in US Treasuries, Yields Surge

The yield on the US 10-year Treasury bond surged over 60 basis points in just three days, reaching 4.5% intraday on the 9th, marking the largest single-day increase since September 2022. The 30-year Treasury yield soared 56 basis points in three days, breaking the 5% mark, a new high since November 2023, and the largest three-day increase since 1982.

According to The Guardian, this surge in yields is not driven by changes in economic fundamentals but rather a "disorderly liquidation" in the market. Jim Bianco, founder of Bianco Research, pointed out that this is a liquidity crisis triggered by hedge funds massively unwinding "basis trade" positions.

Basis Trade Blowup, Leverage Unwinding Triggers Chain Reaction

Basis trading is a strategy used by hedge funds to profit from small price differences between cash bonds and futures. Due to limited profit margins, funds typically use high leverage, with leverage ratios often reaching 50 to 100 times. When market volatility is high, these positions may be forced to close due to margin calls, leading to a chain reaction of bond market sell-offs.

Apollo Global Management's chief economist, Torsten Slok, noted that the current market size of basis trading is estimated at $800 billion and is still expanding. Once prime brokers raise margin requirements or tighten financing conditions, hedge funds will have to sell off large amounts of US Treasury positions, creating a liquidity vacuum in the market.

According to Blocktempo, the deleveraging of this basis trade has already led to a nearly 30 basis point surge in the 10-year US Treasury yield in two days, with the 30-year yield rising 21 basis points in a single day, comparable to the market stampede during the COVID-19 pandemic in March 2020.

Bond Market Panic Spreads to Stock and Forex Markets

As US Treasuries plummeted, US stocks were also affected. On April 8, the Dow Jones Industrial Average fell 320 points, a 0.8% drop; the S&P 500 fell 1.6%; the Nasdaq dropped 2.2%; and the Philadelphia Semiconductor Index plunged 3.57%. VIX, the market fear index, surged to a new high since the pandemic, indicating rising risk aversion among investors.

The US dollar was also sold off. The US Dollar Index (DXY) fell to 102.27 on the 9th, a 0.72% drop over five days, and a cumulative 1.45% decline over a month. The dollar fell 0.67% against the yen and 0.66% against the euro, with funds shifting to traditional safe-haven currencies like the yen and Swiss franc, suggesting that the dollar's status as a safe haven is under scrutiny.

Ben Wiltshire, G10 rates trading strategist at Citibank, stated: "The sell-off in US Treasuries may signal a shift in mechanism, where US Treasuries are no longer the safe haven of global fixed income."

Weak Auction Demand Further Erodes Market Confidence

The US Treasury's bond auctions this week also reflected the collapse of market confidence. In the 3-year Treasury auction, direct bidders (including China and Japan) purchased only 6.2%, a five-year low. The 10-year and 30-year Treasury auctions also resulted in underwriters having to absorb large amounts of unsold bonds, indicating a sharp decline in demand for US Treasuries.

Ed Al-Hussainy, senior rate strategist at Columbia Threadneedle, said: "No one in the market wants to touch US Treasuries right now; everyone just wants to get out quickly."

Global Market Chain Reaction, Safe-Haven Assets Fail

The sharp fluctuations in US Treasuries also affected global bond markets. Japan's 30-year Treasury yield surged to a 21-year high, and the UK's 30-year Treasury yield hit a 27-year high. The reassessment of US inflation and Federal Reserve rate cut expectations has led to dramatic shifts in global capital flows.

Even traditional safe-haven assets like gold were affected. Although gold prices briefly exceeded $3,000 per ounce due to increased safe-haven demand, they subsequently fell back as funds shifted to cash.

References

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With the escalation of the US-China trade war, what impact does the current wave of US Treasury sell-offs have on investment portfolios?

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After the escalation of the U.S.-China trade war, why were U.S. Treasuries sold off, and why did safe-haven assets lose their effectiveness?

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