The market keeps proving itself as the biggest foil for Trump and Musk
April 24, 2025
President Donald Trump's aggressive economic policies have been contained so far in his term, not by Congress but by the markets, and his pivots in the face of withering volatility indicate that stocks and bonds are acting as guardrails to his agenda.
It's not just Trump, either. The market has appeared to diminish the political will of the president's right-hand man in reshaping the government. Elon Musk, despite his soaring political ambitions and his cost-cutting crusade, announced this week that he'd step back from the White House after months of pain for
Tesla stock
.
From Trump's trade war to his plans for the Federal Reserve, here's how markets have affected his agenda as his first 100 days wind down.
Trump's 'Liberation Day' tariffs
What happened:
The April 2 unveiling of
sweeping tariffs
was followed by the worst two-day stretch for the stock market since 2020.
The intense selling continued into the following week, but it was
the bond market
that ultimately got the administration's attention. On April 8, the 10-year Treasury yield touched its highest level since January.
Trump's pivot:
A week after their unveiling, Trump walked back most of his "Liberation Day"
tariffs
, announcing a
90-day pause
on the "reciprocal" duties while leaving a 10% universal tariff on most countries in place.
Trump himself nodded to the sell-off in bonds when speaking with reporters on the White House driveway.
"The
bond market
is very tricky. I was watching it, but if you look at it now, it's beautiful. The bond market right now is beautiful," Trump said. "But I saw last night where people were getting a little queasy."
The market reaction:
The day Trump paused the trade war, the S&P 500 had its best day since 2008, soaring 9.5%. The Nasdaq surged as much as 12%, and the Dow added nearly 3,000 points.
Trump attacks Fed Chair Powell
What happened:
Despite appointing him in 2018, Trump has made it clear that he's not happy with the performance of Federal Reserve Chair Jerome Powell.
That assessment boiled over in recent weeks as the president heaped criticism on the central bank chief for not lowering interest rates. On Friday, the White House economic advisor Kevin Hassett said the administration was exploring ways to fire Powell before his term's end in 2026, and in a post on Monday, Trump called him a "major loser."
Stocks cratered Monday as investors feared for the independence of the Fed. The S&P 500 lost 2.7%, the Dow shed almost 1,000 points, and the Nasdaq dropped 2.6%. Bonds, meanwhile, continued to sell off, with shaken faith in the US driving yields higher.
"This is a perfect time to lower interest rates," he said. "If he doesn't, is it the end? No, it's not. But it would be good timing."
The market reaction:
After he dialed back his comments, the S&P 500 climbed more than 2% on Tuesday, bond yields edged back down, and the dollar stabilized after a long losing streak for US safe-haven trades.
The US-China trade war
What happened
: While Trump walked back his trade war for most countries, he increased the tariff rate on China.
The president ramped up tariffs on imports from the world's second-largest economy to 145% and threatened to keep going higher if the country retaliated. China was undeterred, raising its own tariff rate to 125%.
With that and the attacks on the Fed, investors' outlooks for the US dimmed and the intense selling was exacerbated as economic growth fears spiraled.
Trump's pivot:
Trump said Monday that the 145% tariff he proposed on
US imports from China
was "very high and it won't be that high," adding that levies would "come down substantially."
On Tuesday, Trump said he would be "very nice" to China in trade negotiations.
Elon Musk and DOGE
What happened:
Musk's time with the White House DOGE office has been marked by a steep sell-off in Tesla stock.
Investors have fretted for months that Musk's politics were causing untold brand damage and driving away its most loyal customers.
Since peaking in mid-December, the stock had fallen by 44% by early this week.
Musk's pivot
: On Monday, the Tesla CEO announced he would step back from
DOGE
starting in May, addressing a long-running concern among investors that Musk wasn't spending nearly enough time running his car company.
The market reaction:
Tesla shares
, which dropped as much as 53% from their record high in December, have rallied this week on the news. Shares jumped 5% on Wednesday as investors digested the news, with Musk's departure from the White House overshadowing a bleak earnings report.
Trump is answering to the markets
"No doubt about it," Peter Berezin, the chief global strategist at BCA Research, said when asked whether the market had been a guardrail for Trump. "If stocks go down too much, the bond yields rise. That tempers Trump's behavior. But then, when stocks rally back, yields start to retreat, that probably invigorates Trump to turn back to some of his more market-friendly policies."
Michael Brown, a senior research strategist at Pepperstone, said the president was likely reacting to a trio of economic data: tumbling stock prices, the
sell-off in bonds
, and the
drop in the US dollar
.
"It just all points to investors considerably losing confidence in the United States and in the Trump administration," Brown said. "And I think that really did end up forcing his hands to walk back some of the rhetoric, particularly around the Fed."
