Bond Selloff: Trump Lost, AMZN Lost too!
Was There When It Happened.
I clearly remember just before hitting the sack at around 2:00am Singapore time, shares of $SailPoint Parent, LP(SAIL)$ and $BigBear.ai Holdings(BBAI)$ suddenly spiked.
Real-time charts of these 2 stocks just kept zooming higher and higher, interactively.
I made a note to find out what has happened, later on Thursday.
Now I know.
Apparently, tough guy Trump paused reciprocal tariffs for most countries on Wed, 09 Apr 2025, a few hours after it has come into effect.
This happened after some of his billionaire supporters and financial guru publicly expressed their dissatisfaction with the tariffs.
They were unhappy how these tariffs will drive US economy back into recession.
Those who aired their opinions (openly) included:
Bill Ackman.
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On 07 Apr 2025, Bill called for a 90-day "time-out" on tariffs, warning of a "self-induced economic nuclear winter" if the tariffs continue.
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Argued that while fixing global tariff systems is necessary, the disproportionate tariffs are damaging confidence in US as a trading partner & investment market
Ken Griffin.
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On 08 Apr 2025, Griffin described Trump's tariffs as a "huge policy mistake" and a "tax on families," emphasizing that they harm the middle class.
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He urged reconsideration of the policy to prevent the US from losing its leadership role in promoting free trade globally.
Elon Musk.
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On 08 Apr 2025, Trump’s sidekick criticized Trump's tariffs for unsettling global financial markets and causing significant challenges for Tesla.
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He advocated for a zero-tariff system between EU and the US, labeling Trump's trade advisor Peter Navarro a "moron" during public disputes.
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Musk also shared a video supporting free trade principles.
Jaime Dimon.
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JP Morgan CEO, Dimon warned that Trump's tariffs could lead to inflation and make a recession "a likely outcome."
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While he acknowledged the need to improve trade, he urged faster negotiation of trade deals to stabilize markets and prevent further economic damage.
Stanley Druckenmiller.
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Between 07 -09 Apr 2025, he consistently opposed tariffs exceeding 10%, expressing concerns about their impact on businesses and economic stability.
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He criticized the escalating tariff war as harmful to global trade relations.
Massive Bond Selloff.
More importantly, it was due to (a) escalating financial market turmoil and (b) a dramatic sell-off of US Treasury bonds, causing widespread concerns about the economic fallout from Trump’s tariff policies.
Sell-off in US Treasury bonds was particularly alarming, as it signaled waning investor confidence in US government debt, that is typically considered a safe haven during economic uncertainty.
Yields on 10-year Treasury bonds surged to their highest levels since February 2025, reaching 4.5%.
This increased borrowing costs for US government and exacerbated fears of an economic slowdown.
The unusual market behaviour, where bonds were sold off instead of rallying during stock market declines, heightened concerns within the Treasury Department and the White House
The financial instability prompted urgent discussions among Trump's advisors, including Treasury Secretary Scott Bessent, who emphasized the risks posed by the bond market's volatility.
Business leaders and Republican allies also pressed Trump to reconsider his tariff policies as stock markets plunged and recession fears grew.
With Hobson’s choice, Trump announced a 90-day pause on "reciprocal" tariffs for most countries while maintaining a baseline 10% duty.
However, he simultaneously raised tariffs on Chinese goods from 104% to 125%, continuing the trade war with China
This decision marked a significant shift in Trump's approach and was directly influenced by the financial market's reaction to his policies
Did The Pause Work ?
It did alleviate some immediate pressure on the US Treasury bond market, but it did not fully stem the sell-off. (see below)
Treasury yields, which had surged earlier in the week due to concerns over the economic impact of tariffs, receded slightly after Trump's announcement but remained elevated.
For example, the 10-year Treasury yield was still up +13 basis points at approximately 4.4% by Wednesday afternoon, close to its peak of 4.45% earlier in the day, suggesting while the pause helped stabilize yields somewhat, broader concerns about inflationary pressures and economic instability persisted.
Factors driving Treasury bonds sell-off included:
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Hedge funds unwinding leveraged positions.
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Margin calls triggered by falling asset values across portfolios.
Additionally, fears that tariffs could exacerbate inflation and limit the Fed's ability to lower interest rates further fueled investor uncertainty.
These dynamics created lasting disruptions in the Treasury market, with bid-ask spreads widening and liquidity challenges emerging.
As for whether the sell-off will continue, signs point to ongoing volatility in the near term.
According to Fundstrat Global, Advisor, Mark Newton:
He anticipates a gradual decrease in yields later this year but warns that immediate catalysts for sharp yield drops are lacking.
While Trump's tariff pause has mitigated some immediate risks, the underlying fragility in the bond market remains a concern.
My viewpoints: (mine only)
Firstly, I think all investors need to be clear that :
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The tariffs pause will last for 90 days only.
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At the same time, a baseline 10% tariff had been enforced, it’s not life as usual.
Casualty : $Amazon.com(AMZN)$ .
There is already a Mag-7 stock “affected” by Trump’s tariffs - Amazon Inc.
The e-Commerce giant has already canceled several inventory orders from Chinese suppliers following the implementation of steep US tariffs. (see below)
Additionally, AMZN’s CEO Andy Jassy has just announced that it is very likely that sellers will either pass the increased tariff costs onto consumers or exit Amazon. (see below)
According to Bank of America analysts’ research note out Wednesday:
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In 2018, Amazon's sales brushed off the 2018 tariff rounds.
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However, the broader 2025 measures present a new ballgame for cost structures and logistics.
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As a result of impending ‘unknown’, BAC has lowered AMZN’s price target from $257 to $225, a fall of -12.45%.
Supposed this is what Trump wants for America and its citizens - higher prices and less choice.
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