Analysis: The trade war may have triggered a sell-off in U.S. financial assets

On the evening of April 21, Beijing time, US stocks suffered another severe setback, with the three major indexes opening lower. At the same time, the US dollar also suffered a violent sell-off, with the US dollar index falling below the 98 mark for the first time since March 2022. In addition, US Treasury bonds also fell short-term, with the yield of the 30-year US Treasury bond hitting 4.989% at one point; the yield of the 10-year Treasury bond once exceeded 4.4%. Wall Street warned that the "firing Powell" controversy had greatly weakened investor confidence, because the independence of the Federal Reserve has long been regarded as a key guarantee for investing in US assets. Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, said investors should not rule out the possibility that Mr. Trump might try to follow through on his threat to fire Mr. Powell - a move that could exacerbate the sell-off in Treasuries and the dollar. "Investors are facing a new source of macro risk, namely Mr. Trump's threats to Fed independence," wrote Adam Crisafulli, analyst at Vital Knowledge. "This is closely tied to the trade war, with Mr. Powell and other officials forced to hold their ground as tariffs threaten to send inflation soaring in the coming months, even as markets are already volatile and downside risks rise." Mr. Crisafulli added: "The simultaneous declines in equities, the dollar and Treasuries suggest that Mr. Trump's trade war may have triggered a sell-off in US financial assets that cannot be reversed by negotiation."