Podcast Summary: "It's Not a Trade War— It's a Yield War. Here's Why That Matters"

Money Rehab with Nicole Lapin Hosted by: Money News Network
Release Date: April 10, 2025
Duration: Approximately 10 minutes

Introduction

In the episode titled “It's Not a Trade War— It's a Yield War. Here's Why That Matters,” Nicole Lapin delves into the recent tumultuous movements in the stock market, unraveling the complex interplay between tariffs, Treasury yields, and the broader implications for the U.S. economy. Moving beyond traditional trade war narratives, Lapin introduces the concept of a “yield war,” emphasizing its significance for listeners' financial well-being.

Market Crash & Rally

Lapin begins by recounting the dramatic fluctuations in the stock market over the past few days:

• April 2 & 3: The S&P 500 plummeted by 10% over two consecutive trading days.
• April 4: The Dow Jones Industrial Average shed 2,200 points in a single day.
• April 5: A swift rebound saw the S&P 500 recover 8%, and the Dow surged nearly 2,500 points.

"The whiplash I experienced is only second to the whiplash I experienced in the markets this week." [02:15]

Misinformation Trail

Lapin attributes the initial rally to a cascade of misinformation stemming from social media:

1. Bill Ackman's Tweet: On Sunday, hedge fund manager Bill Ackman tweeted about President Trump considering a 90-day pause on tariffs to negotiate and resolve unfair tariff deals, warning of an impending “economic nuclear winter” if no action was taken.

2. Kevin Hassett’s Comments: On Monday, during a Fox News interview, Kevin Hassett, President Trump’s Director of the National Economic Council, vaguely addressed the possibility of a tariff pause without confirming Ackman’s claims.

3. Walter Bloomberg’s Misreporting: A misinterpretation of Hassett’s comments by Walter Bloomberg on Twitter led to widespread misinformation. “Walter Bloomberg said that Reuters said that CNBC said that Kevin Hassett said that Trump said that he was considering a 90-day pause on tariffs...” [08:45]

This misinformation caused the market to rally by 10%, only for the facts to resurface two days later when Trump officially announced a partial tariff pause.

"It was basically a crazy, crazy game of telephone." [10:30]

National Debt and Treasury Yields

Shifting focus, Lapin addresses the critical issue of the United States' national debt, which stands at $36.2 trillion as of the recording:

• Debt Refinancing: The U.S. needs to refinance nearly $9 trillion of debt within the next year as Treasuries mature.
• Interest Rates Impact: With the 10-year Treasury yield rising above 4%, each basis point increase adds billions in interest expenses.

"For the government, Treasuries are loans and therefore part of the national debt. So if yields on Treasuries went down, that would benefit the government and curb the debt." [15:00]

Lapin warns of the potential for a sovereign debt crisis akin to Greece’s 2008 crisis if yields do not decrease:

"Famed investor Ray Dalio says that if yields don't go down, we could have a sovereign debt crisis like Greece in 2008." [18:10]

China's Role and Tariffs

China remains a pivotal manufacturing and trading partner for the U.S., and current tariffs still impose significant burdens:

• Tariff Adjustments: Trump’s recent announcement retains a 125% tariff rate on Chinese goods while reducing tariffs to a 10% universal rate for other countries.
• Economic Implications: These tariffs spike short-term inflation and hinder growth, contributing to the pressures on Treasury yields.

"Everyone thinks Trump's new tariffs are about punishing China or reviving American manufacturing, and that the stock market is just collateral damage. But that's not the entire story." [22:50]

Yield War Explanation

Lapin introduces the concept of a "yield war," framing the conflict as a strategic maneuver between the President and the Federal Reserve:

• Options to Lower Yields:

  1. Flight to Bonds: Typically, yields decrease when investors flock to bonds for safety during stock market crashes. However, in the recent dip, yields rose because investors sold bonds to cover stock losses.
  2. Federal Reserve Rate Cuts: The Federal Reserve may lower interest rates to make borrowing cheaper, thereby reducing Treasury yields.

• Tariffs as a Pressure Tool: Trump may be using tariffs intentionally to stifle economic growth, compelling the Federal Reserve to cut rates.

"This isn't a trade war, it's really a yield war. And your wallet is in the middle." [28:30]

Lapin suggests that the administration might be engineering this economic turbulence to influence Fed policy without directly communicating their intentions.

Tips and Conclusion

To help listeners navigate these turbulent times, Lapin offers practical advice:

1. Monitor the Bond Market:
   "If yields keep climbing, that refinancing problem gets worse." [30:00]

2. Watch Federal Reserve Signals:
   Stay attuned to any hints of rate cuts, which could significantly impact markets.

3. Keep an Eye on China:
   Escalation in tariffs could reignite economic tensions, affecting global trade dynamics.

Lapin also teases an upcoming episode featuring Austan Goolsbee from the Federal Reserve Bank of Chicago, who will provide deeper insights into Fed actions and expectations.

"I’m going to help you with that because in a couple of weeks, I'm going to have Austan Goolsbee on Money Rehab to help you understand what you can expect when the Fed makes its next announcement." [32:15]

Final Thoughts

Nicole Lapin effectively demystifies the intricate relationship between tariffs, Treasury yields, and the broader economic landscape. By framing current events as a "yield war," she provides listeners with a nuanced understanding of how these factors interplay and offers actionable strategies to safeguard their financial health amidst uncertainty.

Notable Quotes:

• "The whiplash I experienced is only second to the whiplash I experienced in the markets this week." — Nicole Lapin [02:15]
• "This isn't a trade war, it's really a yield war. And your wallet is in the middle." — Nicole Lapin [28:30]
• "If yields don't go down, we could have a sovereign debt crisis like Greece in 2008." — Nicole Lapin [18:10]

Stay Connected:

For further financial guidance, email your questions to moneyrehab@moneynewsnetwork.com and follow Money News Network on Instagram and TikTok for exclusive content.