Quora Answer: Why is Donald John Trump Causing the US Dollar & US Treasury Prices to Tumble & The Stock Market to Drop?

The following is my answer to a Quora question: “Why is Donald John Trump causing the US dollar and US Treasury prices to tumble and the stock market to drop?”

The question has a specific, documented mechanism behind it, and that mechanism has played out in real time across 2025 and into 2026, with the kind of data trail that makes speculation unnecessary.  We can talk about the data, but I cannot explain the intent since that assumes there is a logical train of thought behind this – something I remain sceptical of.

The First Reason: “Liberation Day”

On 2^nd April 2025, President Donald John Trump announced a sweeping set of tariffs, more severe than markets had priced in, branding the announcement “Liberation Day.”  The S&P 500 plunged nearly 5% the following day, its worst single day since the COVID crash of 2020.  The day after that, it fell a further 6% as China’s retaliatory response raised the spectre of a full trade war.  Critically, this was not a normal equity selloff, where frightened capital flees into the dollar and government bonds as a safe haven.  The dollar fell alongside stocks, and the Treasury market itself, historically considered the safest asset class in existence, began showing genuine signs of stress.  Trump himself acknowledged the bond market had gone “queasy,” and paused the tariffs on 9^th April 2025 specifically in response to that bond market reaction.  When a President has to walk back policy because government debt itself is refusing to behave, that is not noise.  That is markets pricing in a genuine loss of confidence in US fiscal management.

The Second Reason: A Sovereign Credit Downgrade Building for Over a Decade

On 16^th May 2025, Moody’s downgraded the United States’ long-term credit rating from Aaa to Aa1, ending the country’s triple-A status across all three major ratings agencies, following S&P’s downgrade in 2011 and Fitch’s in 2023.  Moody’s cited persistent fiscal deficits, projecting federal debt to reach 134% of GDP by 2035, up from 98% in 2023, with the deficit widening toward nearly 9% of GDP.  Interest payments on US debt already consumed 34% of federal tax revenue in the first quarter of 2025, up from just 9% of federal revenue in 2021, according to St. Louis Federal Reserve data, an almost fourfold jump in the government’s own debt-servicing burden in under four years.  The US Dollar Index fell below 100.50 immediately following the downgrade, then continued sliding toward 99.50 within days, as Federal Reserve officials, including San Francisco Federal Reserve President Mary C. Daly and Atlanta Federal Reserve President Raphael Bostic, publicly flagged deteriorating business and consumer confidence tied directly to erratic trade policy.

The Third Reason: The Attack on Federal Reserve Independence

A research note from the Centre for Economic Policy Research identified policies undermining the Federal Reserve’s independence as a distinct and separate driver of dollar weakness, alongside the fiscal deterioration itself.  A central bank perceived as politically captured loses the one credibility asset that makes its currency a global reserve asset in the first place: the belief that monetary policy will be set on economic grounds rather than presidential preference.  Markets do not need the independence to actually be compromised to react.  They only need to believe it might be, and price the risk in accordingly.

The Fourth Reason: Cumulative Uncertainty

Matt Orton, chief market strategist at Raymond James, described 2025 as a year defined by “more volatility events because there is so much uncertainty with respect to policy, politics, inflation, and the path of rates.”  Uncertainty itself carries a price.  Every asset class demands a higher risk premium when the policy environment generating cash flows and interest rate paths becomes genuinely unpredictable from one announcement to the next, and 2025 delivered exactly that kind of unpredictability, tariff announcements reversed, paused, struck down by the Supreme Court in a 6-3 ruling in February 2026 under the International Emergency Economic Powers Act, then reimposed through other legal channels.

Moving Forward

The administration points to roughly $600 billion in tariff revenue collected as of early 2026, a genuine fiscal offset even sceptics acknowledge, and corporate earnings growth has continued driving US equities to fresh all-time highs through much of 2025 and 2026, suggesting markets have absorbed and partially priced through the initial shock.  Some strategists maintain that once tariff policy stabilises and Federal Reserve communication under new Chair Kevin Warsh settles into a predictable pattern, much of the volatility premium currently priced into Treasuries and the dollar could unwind.  They are delusional.  Whether that stabilisation materialises, or whether the structural fiscal trajectory Moody’s flagged simply reasserts itself once the current news cycle moves on, remains genuinely unresolved, and reasonable analysts sit on both sides of that question.  The US has precipitated a decline borne from a lack of confidence in the underlying democratic institutions.  That level of institutionalised spite and kakistocracy will not disappear when Trump steps down.  The people that enabled this are still there – and they vote.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code