Playing Dangerous Games With the Dollar By Spencer Jakab

Markets are calmer and stocks are set to open higher after a tariff exemption (or is it just a delay?) on imports of consumer electronics. Apple, America's most valuable company, is a key beneficiary and its stock is up in premarket trading.

***

The White House started a high-stakes tariff game . Is it just figuring out all of the rules?

Donald Trump has called Chinese leader Xi Jinping "a good poker player," though the president's fans insist he's even better . More recently, Treasury Secretary Scott Bessent used Texas Hold 'em lingo to describe America's supposed position of strength in the trade war:

I think it was a big mistake, this Chinese escalation, because they're playing with a pair of twos. What do we lose by the Chinese raising tariffs on us? We export one-fifth to them of what they export to us, so that is a losing hand for them.

What happened? Trump's postponement of some tariffs, and a possible exemption over the weekend on consumer electronics largely imported from China, have been described as "folding." That wasn't because Xi is a master bluffer. International trade is an unusual poker game in which America has a huge stack of chips that other players have been happy to keep topping up.

Leaving aside how much it would cost for America to make its own iPhones , the flip side of trade deficits has been trillions of dollars being recycled into dollar assets. Much of it helps finance massive federal borrowings on which the annual interest bill alone is $1 trillion.

During past shocks-even those directly affecting America like the 9/11 terror attacks and S&P's debt-rating downgrade in 2011-investors flocked to the safety of U.S. government debt. Now the opposite seems to be happening .

Some have speculated that China, with about $750 billion of Treasurys, deliberately hurt their value. That seems unlikely, but what spooked the market is beside the point: A continued bond and dollar selloff could be costly for China but worse for America.

Less need to recycle dollars and less faith in U.S. assets means higher mortgage rates, an erosion of the premium valuation that American stocks enjoyed and a rising cost of living, even without tariffs. American companies would pay more to borrow, pinching profits.

The stakes for the government and taxpayers are high too. An eventual half-percentage-point increase in the average Treasury yield would add about $150 billion in annual interest expense.

Imagine this were some other type of conflict, like a foreign diplomatic standoff playing out in the news instead of one whose results show up daily on 401(k) statements. In that case Americans might have more faith that the White House's constant pivots really are strategic moves, befitting of tournament poker or "3D chess."

To investors, it feels more like Chutes and Ladders .

Help us make Markets A.M. a better newsletter. Take our one-question survey .

Stocks I'm Watching

Goldman Sachs: Shares rose in premarket trading ahead of its earnings report. JPMorgan Chase , Wells Fargo and Morgan Stanley all posted higher profits Friday, but flagged concerns about trade turbulence.

Apple : The Trump administration exempted PCs, memory chips, smartphones and other electronics from broad tariffs , but said more-targeted duties were in the works. Shares in Apple, Dell and HP all gained more than 5% premarket.

Nvidia : Chip stocks posted mostly smaller gains ahead of the open amid a broad tech rally. Commerce Secretary Howard Lutnick warned Sunday that many tech products will still face separate levies in a month or two as part of a trade-law investigation into semiconductors.

Centene : The insurer's shares are set to open lower on news that hundreds of billions in Medicaid cuts could be coming.

CONTENT FROM: Goldman Sachs Trade uncertainty is driving volatility across global markets

Rapid announcement and implementation of policies on everything from trade and taxes to crypto, inflation, and geopolitics have rippled through markets in recent weeks. Find clarity among market complexity with perspectives from Goldman Sachs leaders.

Explore our markets coverage.

Markets at a Glance

Data refreshes every time you open this email.

Follow our live markets coverage , updated throughout the day.

One Big Chart

Clouds Part Over Apple's Stock

Apple entered Liberation Day with a premium valuation despite some recent struggles and it took the biggest hit among big tech companies. The iPhone maker's shares are likely to make up lost ground on Monday given the latest exemptions. Even so, investors shouldn't assume it's back to business as usual.

What I'm Reading Here are five things to watch for signs of market trouble. ( WSJ ) At the world's biggest wholesale market in this eastern Chinese exporting hub, American clients have disappeared. ( WSJ ) America needs its allies and partners for what is shaping up as a protracted contest for geopolitical primacy now that President Trump has unleashed a trade war against China. They're in no rush to take sides. ( WSJ ) Some $600 billion in Medicaid payments to states is in the crosshairs of congressional budget cutters. An obscure set of state taxes on hospitals and other health providers which is reimbursed triggers the payments. ( WSJ ) Every American business is feeling the heat from a trade war and recession fears. For the fragile office-market recovery, it's an especially troublesome time. ( WSJ ) Beyond the Newsroom

Buy Side from WSJ: These are the best deals to score right now on products we've vetted and tested.

About Me

My name is Spencer Jakab and I've been musing about money and markets for more than 30 years, including editing The Wall Street Journal's Heard on the Street column for a decade, writing two investing books and running a team of stock analysts at a global investment bank.

The Markets A.M. newsletter prepares you for the trading day ahead, with expert insight into the companies and industries set to move markets. Send your feedback to [markets.am@wsj.com], or reply to this email.

Enjoying this newsletter? Get more from WSJ and support our journalism by subscribing today with this special offer .

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

April 14, 2025 06:47 ET (10:47 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.