Markets don’t care about bluster. They care about money. And for the past two weeks, the money has been making a quiet exit—out of US dollars, out of Treasurys, and straight into gold. While President Trump’s escalating trade drama plays out like a high-stakes poker match, investors aren’t waiting to see who blinks. They’re already hedging, and according to veteran economist Dr. Komal Sri-Kumar, it’s the clearest sign yet that global markets are pricing in risk—not from war or supply chains, but from Washington.
It all started with what Trump dubbed “Liberation Day” on 2 April. With a fresh volley of tariffs and tough talk about economic fairness, the White House signalled its commitment to rewriting the rules of global trade. The plan: raise tariffs on everyone, punish those who retaliate, and dare anyone to strike back harder.
That bravado lasted less than a fortnight.
As US equity markets tumbled, the dollar sagged, and Treasury yields jumped, the administration quietly rolled back most of the proposed tariffs. Europe got a 90-day reprieve. Canada too. Only China remained in the firing line, staring down a proposed 145% tariff on selected goods. Beijing’s response was swift: it raised its own tariffs to 125% and called it quits on buying anything more from America—at least for now.
“The Chinese reluctance to negotiate isn’t just political,” says Sri-Kumar. “They’re watching asset markets react to US moves, and they see the panic.”
And panic, while rarely acknowledged, is exactly what’s driving this market behaviour. Start with Treasury yields. The benchmark 10-year note saw a sharp rise from 4.13% on April 2 to 4.58% intraday just over a week later. Rising inflation expectations offer part of the explanation, but Sri-Kumar says that’s only half the story. “We’re seeing country risk—sovereign risk—enter the conversation for the US. That hasn’t been the case for decades.”
That’s a powerful observation. Sovereign risk is a term typically reserved for emerging markets, not for the world’s reserve currency issuer. But as the Trump administration floats ideas like turning short-term debt into longer-term or zero-coupon instruments—a move that smacks of desperation to mask the fiscal deficit—investors are rightly alarmed.
There’s a growing sense that the US could be undermining its own credibility, not through military adventurism or political upheaval, but through economic policy that looks improvised at best. The so-called “Mar-a-Lago Accord”, whispered among Trump allies, is a proposal to engineer a weaker dollar under the guise of export competitiveness. It might work politically in swing states. But in the global capital markets, it’s being read as a warning sign.
And so, the money moves. Gold, the traditional hedge against inflation, war and chaos, has surged. It jumped nearly 7% in a single week, reaching a record $3,255 per ounce. That’s not a speculative rally. That’s capital flight.
“When people abandon a currency and flock to a rock, it’s not about returns,” says Sri-Kumar. “It’s about trust. And trust in the dollar is fraying.”
This has real consequences. One of America’s most underappreciated economic privileges is seigniorage—the ability to print money that the rest of the world accepts in exchange for real goods and services. It’s a free lunch, economically speaking. Lose that privilege, and you pay retail.
The signs are adding up. As the euro moved from under $1.10 to over $1.14 against the dollar in a matter of days, traders shrugged off what should have been dollar-positive news. Tariffs, after all, restrict imports and are traditionally expected to boost a nation’s currency. But instead of a stronger greenback, we saw it wobble. Investors, again, are reading the policy confusion as a warning sign.
That’s the real issue here. The content of the policy matters less than the erratic delivery. One week, threats. The next, handshakes. A China call that never comes. A press secretary insisting talks are imminent, while Xi Jinping remains silent. Markets thrive on predictability. This administration is offering theatre.
The irony is that Trump’s initial complaints about unfair trade practices weren’t without merit. Many of America’s trade partners have benefited from access to its open economy while protecting their own. But the remedy—tariffs, retaliation, more tariffs—is turning into its own problem. “You don’t fix a fracture by jumping on the leg,” Sri-Kumar notes in his newsletter.
There’s another dimension that’s rarely discussed. If global investors begin to question the sustainability of US fiscal policy—especially with rising debt, higher interest payments, and no cohesive plan to address it—then the consequences could echo for years. The cost of borrowing goes up. The appetite for US debt weakens. And the cycle feeds itself.
To be clear, this isn’t about 2008-style panic. It’s subtler than that. But just as dangerous in the long term. Sovereign risk sneaks in slowly, not with a bang but with a shrug—from an investor choosing Frankfurt over Wall Street, or gold over greenbacks.
By Wednesday, even the White House seemed to sense the shift. The sudden reversal of tariff timelines wasn’t framed as a concession, but it read like one. With other trade partners like Canada and the EU now seeing how quickly the US can fold, their own appetite to make concessions may fade. Everyone is watching China. But everyone else is taking notes.
This is how market-based diplomacy works. You don’t need to fire a shot to make a point. You just move your money.
As for the signals? They’re loud and clear: bond yields rising despite no major inflation print, gold at an all-time high, and the dollar slipping despite textbook reasons to rally. These are not disconnected data points. They are the canaries in the coal mine.
Trump may think he’s holding the cards. But the market, quietly, has started to call the bluff.
Quotes in this article are based on Dr Komal Sri-Kumar’s latest newsletter, “Trump Blinks: Watch For More Flip-Flops.”
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💰 Markets shift quietly as trust in US policy erodes 💸 📉 Investors flee dollars & Treasurys for gold 🪙 📊 Sri-Kumar warns of rising sovereign risk for the US 🇺🇸 🤔 Erratic trade moves spark economic uncertainty worldwide 🌍 #TheIndianSun @SriKGlobalhttps://t.co/yWE3tma3B1
— The Indian Sun (@The_Indian_Sun) April 15, 2025
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