Is Trump Crashing the Market on Purpose? | Image Source: www.cnbc.com
WASHINGTON, D.C., April 6, 2025 – President The speculation on Donald Trump’s economic strategy took a lively and controversial turn. After weeks of sharp declines in the stock market, President Trump shared a provocative video on his social media platform, Truth Social, suggesting - without explicitly confirming – that the current economic turbulence can be a calculated movement. The video boldly states that Trump intentionally orchestrates a fall in the market to reduce interest rates, establish a Treasury rally and pave the way for economic recovery from a lower reference level. While many initially excluded this theory as a band, the concept of a deliberate ”J-curve” strategy begins to attract serious scrutiny by economists and market analysts.
The calendar of events is critical. Since Trump announced a new wave of tariffs on April 2, the US stock market is spiraling. The average industrial Dow Jones fell by more than 5.5% in one day, losing over 2,200 points. Splam; P 500 fell by almost 6%, and Nasdaq fell by 12% in just two days – to officially push it into the bear market. In the middle of this carnage, Trump posted a video originally shared on X (formerly Twitter), which claimed that this economic disruption was not accidental but strategic. The central message of the video? Start the market now, tap the Federal Reserve to reduce tariffs, then bounce back.
What is J-Curve theory and why is it important?
The term “J curve” refers to a short-term decline followed by a strong recovery, creating a form similar to the letter “J”. It is a concept often used in trade policy, in external relations, and now more and more stories of economic recovery. According to this theory, Trump’s tariffs and other disruptive measures can cause immediate pain, the fall of the market, the panic of investors, even a short recession, but could eventually lead to a stronger economy strengthened by lower interest rates, lower dollars and more competitive exports.
According to Fortuna, some analysts argue that this could be an intentional game to reduce loan costs and economic growth that prevails towards the electoral cycle of 2026. Lower interest rates make debt cheaper, housing more accessible and the value of potentially more attractive shares. FX strategist Kevin Ford in Convera has cautiously suggested that, although Trump is probably not looking for a total recession, there is ”increased comfort with a short-term recession”
Trump’s constant pressure on the Federal Reserve gives some weight to this perspective. He publicly criticized Fed Jerome Powell’s president, suggesting even that Powell’s work could be in danger if interest rates did not fall. While the president does not have the power to dismiss the Fed’s presidency, rhetoric alone shakes market uncertainty and raises legitimate concerns about the Fed’s independence.
Is there any evidence to support the theory?
There are, to a certain extent. Treasury yields have declined sharply as bond prices increase, a reverse relationship often driven by investor fear. A stock sale usually triggers a flight to security, and U.S. Treasurys are still a preferred shelter. As prices increase, yields decline, which could lead the Fed to re-evaluate its tariff position, especially if consumer confidence or the number of jobs begin to decline. In this sense, Trump’s shared video is not completely separated from reality.
According to CNBC, the director of the National Economic Council, Kevin Hassett, strongly opposed the idea that the administration orchestrates an accident. In an interview about ABC’s “This Week,” Hassett said:
“He’s not trying to stop the market. He’s trying to deliver the American workers.”
But it is not only public statements that have wandering languages. Trump’s digital behavior, such as the repositioning of economic videos in conspiracy without context or clarification, adds to ambiguity. This is the kind of signal that feeds the narrative on nuance, especially when market players are already on the point.
Is this strategy legal or ethical?
Legally, the President may set rates, propose tax policies and express opinions on the Federal Reserve. However, if a deliberate fall in the market were possible, it would raise serious ethical questions. The ESA and other financial regulators monitor market manipulation, but it is extremely difficult to prove the intention, especially when tactics are deployed under the pretext of macroeconomic policy.
And the line is blurred. Defenders could argue that short-term pain for long-term gains is a strong leadership element. Critics would argue that investor losses, the erosion of retirement savings and the creation of economic instability to build a strong Fed are unwise and self-service.
Even within the administration, there seems to be dissonance. While Hassett insists that the market slide is not part of a large plan, Trump’s passive amplification of the opposite view displays the waters. The juxtaposition of official denial and informal suggestion create a narrative vacuum, quickly filled with speculation, fear and volatility.
What do the markets think?
Markets are driven by perception and data. The perception that the White House is indifferent or even encouraging, market volatility can destabilize investor confidence. When leadership seems unpredictable, investors often withdraw from security. The growing demand for Treasures this week suggests exactly that. In addition, foreign investors can begin to undermine the stability of the United States, increasing pressure on the dollar and the treasury market.
According to Yahoo Finance, the purchase of this week’s bonds has led to a 10-year decline in Treasury performance to less than 3.2%, a level that has not been observed since the end of 2023. Mortality rates have responded accordingly, which has decreased slightly, but if this translates into a real economic stimulus, it remains to be seen.
Meanwhile, the Federal Reserve remains largely silent. President Powell reaffirmed the Fed’s independence, focusing on data-dependent decisions. But with increasing political pressure and roaring markets, staying on track can be increasingly difficult, especially if the administration continues to flatter the waters.
Q Pulmamp: A: Questions on the Internet
Is Trump really trying to crash the stock market?
There is no confirmed strategy to crash the market, but Trump’s behavior and statements – including sharing the now famous video – have fueled speculation. Officially, White House economic advisors deny that this is a coordinated plan.
What is a J-curve and how does it relate here?
A J curve represents a temporary economic decline followed by a strong recovery. Some analysts think Trump could use this concept to justify short-term pain in the hope of long-term economic gains, perhaps by forcing the Fed into interest rates.
How has the market reacted to Trump’s recent tariffs?
Negative. The Dow, Sюamp, P 500 and Nasdaq have experienced sharp declines since the announcement of the new tariffs. Investors fear a growing trade war and a possible recession.
Could this strategy actually work?
In theory, yes. Lower interest rates and lower dollar rates could increase exports, housing and business investment. But collateral damage, market instability, the confidence of lost investors, could be serious and lasting.
What role does the Fed play in all this?
The Federal Reserve is responsible for maintaining economic stability through interest rate policy. If market decline continues and economic indicators worsen, the Fed may feel compelled to reduce rates, even if political pressure is the underlying driver.
Is this unprecedented?
While political figures often criticize central bank policy, sharing videos that accuse themselves of “express” markets is certainly unique in modern political history. The absence of precedents makes this situation even more worrying for investors and economists.
And then what?
If this is a deliberate strategy, it is a high-risk economic approach. And if not, the communication style of the administration inadvertently creates its illusion. In any event, the consequences are real: market volatility, investor uncertainty and dazzled federal reserve.
The way forward will depend on several key variables. Will the Fed remain firm or react to market panic? Will Trump continue to amplify stories that destabilize markets? And will American consumers and investors have resistance to short-term shocks to achieve uncertain long-term benefits?
In many ways, this episode highlights a more important issue: the growing overlap between policy and economic policy. When the political strategy seems to go beyond the foundations of the market, confidence erodes. And once trust is gone, even the best politicians can fight for strength.
