| A GREY SWAN PUBLICATION | Wednesday April 9, 2025 | Ripple Effect — April 9, 2025
Global tariff rates have soared in the past week. And it’ll get higher as further reciprocal tariffs kick in.
Thanks to President Trump’s “Liberation Day,” consumers are now burdened with an effective tariff rate at their highest level in over a century:  For now, it’s a tariff finger trap, with both sides pulling higher. We’ll see who blinks first: The U.S. or China.
Meanwhile, after the market selloff started to push interest rates lower, a much-needed way to relieve the burden of the $37 trillion federal debt, yields have now moved sharply higher.
In other words, investors aren’t buying U.S. debt and pushing yields lower. They’re sellers. Big time:  What’s happening? China may be selling off its Treasury holdings quickly. That would be a considerable escalation of the current trade war, above and beyond tariff rates. But there’s no confirmation there yet.
It’s more likely that hedge funds that trade the spread between Treasury yields are rapidly unwinding their trades, suffering amid massive losses while doing so. About 10-12 hedge funds are big players in this space. And if they’re all heading for the exit at once, this yield spike could get worse. And we could even learn the name of the first financial institution to go under, adding to the likes of LTCM, Lehman, and Silicon Valley Bank.
If this trend worsens, we suspect the Fed will have to step in and buy Treasurys, as it has before. That wouldn’t mean an official interest rate cut, but it would be a sign that the financial system is reaching a breaking point.
This new twist to events could also help fuel a further market move lower. Investors don’t have a clear light at the end of the tunnel yet.
Addison P.S. If you’re a paid Grey Swan member, join me and Andrew for Grey Swan Live! Tomorrow, Thursday, April 10, at 11 AM ET.
Last week, we covered our overall asset allocation strategy. This week, we’ll walk through the model portfolio — what’s held up, what’s breaking down, and where the next opportunity lies. 15 of our 20 stocks are still in good shape. Our aggressive five? Up 100% in aggregate. We'll also talk trade, tech, and how to keep your capital safe in a world that’s being rewritten.
As always, your cheerful reader feedback is welcome: feedback@greyswanfraternity.com (We read all emails. Thanks in advance for your contribution.)
How did we get here? Find out in these riveting reads: Demise of the Dollar, Financial Reckoning Day, and Empire of Debt — all three books are now available in their third post-pandemic editions. You might enjoy one or all three. 
(Or… simply pre-order Empire of Debt: We Came, We Saw, We Borrowed, now available at Amazon and Barnes & Noble or if you prefer one of these sites: Bookshop.org, Books-A-Million or Target.)
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