President Donald Trump has added further volatility and uncertainty to his trade war by exempting a variety of consumer electronics and essential tech components from tariffs. This move is anticipated to boost shares of U.S. technology companies and positively affect the stock market, though it may yield different reactions in the bond and currency markets.
Trump has previously demonstrated his ability to instigate significant stock market rallies, and these tariff exemptions are expected to favor technology stocks. However, reactions in the bond and currency markets may not echo this optimism. On a recent Wednesday, U.S. stock indexes recorded substantial gains following Trump’s announcement of a 90-day suspension on certain tariffs, despite increasing tariff rates for China. This development allowed a recuperation of some of the $6 trillion in market capitalization lost after his “Liberation Day” tariff declaration, which had initially unsettled global investors.
U.S. Customs and Border Protection released new guidance late Friday, exempting imports such as smartphones, computers, semiconductors, chip-making equipment, flat-panel TVs, and critical tech components from Trump’s “reciprocal tariffs.” The stock market is likely to see further gains when it reopens. Dan Ives, a Wedbush analyst, referred to these exemptions as the “best possible news for tech investors” in a post on X, suggesting that this news lifts a substantial burden from the tech sector.
Despite this, recent selloffs in the dollar and Treasury bonds have indicated that while a temporary relief in tariffs may encourage stock investors seeking quick gains, it fails to provide reassurance to currency and bond investors focused on long-term security. Although Trump’s 90-day tariff suspension initially led to a decrease in Treasury yield peaks, they continued to ascend later in the week as bonds sold off amidst rising stock prices.
The perception of U.S. assets as safe havens is diminishing, coinciding with a shift away from the dollar. Former Treasury Secretary Larry Summers noted that U.S. bonds are beginning to trade similarly to those of emerging market nations. George Saravelos, global head of FX research at Deutsche Bank, highlighted in a recent note that the market is rapidly de-dollarizing, indicating a loss of faith in U.S. assets as the market actively reduces its U.S. asset holdings rather than increasing dollar liquidity.
Saravelos observed that the Trump administration appears to be accelerating this de-dollarization process. He emphasized the potential challenges in maintaining an orderly transition. Likewise, Neel Kashkari, President of the Minneapolis Federal Reserve, pointed to the movements of the dollar and bonds as evidence of investors beginning to turn away from the U.S. Normally, significant tariff increases would cause the dollar to rise; however, its concurrent decline suggests a shift in investor preferences.
The predicted decline of the U.S. dollar has been frequently forecasted in the past without materializing. The de-dollarization trend has been ongoing for years, particularly following Russia’s invasion of Ukraine in 2022, which resulted in sanctions that spurred other countries to question the safety of their own dollar holdings. Since then, central banks have increased their gold reserves, which have reached record high prices post-Trump’s tariff impacts, while top economies like China, India, and Brazil conduct more international transactions using non-dollar currencies.
Tariffs have weakened the long-held notion of “American exceptionalism,” and rising debt levels might challenge the “exorbitant privilege” the U.S. has enjoyed for an extended period. Meanwhile, global trust in the U.S. continues to be strained, as Trump’s actions have often surprised traditional security allies and trade partners since his inauguration. The implementation of the highest tariffs in more than a century—despite being repeatedly adjusted—might mark the beginning of a permanent divide.
Saravelos remarked that the damage to the USD has been done, with the market reassessing the dollar’s structural appeal as the global reserve currency and undergoing a rapid de-dollarization process. This trend is most evident in the continuing decline of both the currency and the U.S. bond market as the week concludes.
This article originally appeared on Fortune.com.