Business
Trump’s Tariff War Has Added Risk to U.S. Bonds, Long the Surest Bet in Global Finance
There are not many certainties in the world of money, but this traditionally has been one of them: When life turns scary, people take refuge in American government bonds.
Investors buy U.S. Treasuries on the assumption that, come what may — financial panic, war, natural disaster — the federal government will endure and stand by its debts, making its bonds the closest thing to a covenant with the heavens.
Yet turmoil in bond markets last week revealed the extent to which President Trump has shaken faith in that basic proposition, challenging the previously unimpeachable solidity of U.S. government debt. His trade war — now focused intently on China — has raised the prospect of a worldwide economic downturn while damaging American credibility as a responsible steward of peace and prosperity.
“The whole world has decided that the U.S. government has no idea what it’s doing,” said Mark Blyth, a political economist at Brown University and co-author of the forthcoming book “Inflation: A Guide for Users and Losers.”
An erosion of faith in the governance of the world’s largest economy appears at least in part responsible for the sharp sell-off in the bond market in recent days. When large numbers of investors sell bonds at once, that forces the government to offer higher interest rates to entice others to buy its debt. And that tends to push up interest rates throughout the economy, increasing payments for mortgages, car loans and credit card balances.
Last week, the yield on the closely watched 10-year Treasury bond soared to roughly 4.5 percent from just below 4 percent — the most pronounced spike in nearly a quarter century. At the same time, the value of the American dollar has been falling, even as tariffs would normally be expected to push it up.
Other elements also go into the explanation for the bond sell-off. Hedge funds and other financial players have sold holdings as they exit a complex trade that seeks to profit from the gap between existing prices for bonds and bets on their future values. Speculators have been unloading bonds in response to losses from plunging stock markets, seeking to amass cash to stave off insolvency.
Some fear that China’s central bank, which commands $3 trillion in foreign exchange reserves, including $761 billion in U.S. Treasury debt, could be selling as a form of retaliation for American tariffs.
Given the many factors playing out at once, the sharp increase in yields for government bonds registers as something similar to when medical patients learn that their red blood cell count is down: There may be many reasons for the drop, but none of them are good.
One reason appears to be an effective downgrading of the American place in global finance, from a safe haven to a source of volatility and danger.
As Mr. Blyth put it, Treasury bills have devolved from so-called information invariant assets — rock-solid investments regardless of the news — to “risk assets” that are vulnerable to getting sold when fear seizes the market.
The Trump administration has championed tariffs in the name of bringing manufacturing jobs back to the United States, asserting that a short-term period of turbulence will be followed by long-term gains. But as most economists describe it, global trade is being sabotaged without a coherent strategy. And the chaotic way in which tariffs have been administered — frequently announced and then suspended — has undercut confidence in the American system.
For years, economists have worried about an abrupt drop in the willingness of foreigners to buy and hold United States government debt, yielding a sharp and destabilizing increase in American interest rates. By many indications, that moment may be unfolding.
“People feel nervous about lending us money,” said Justin Wolfers, an economist at the University of Michigan. “They are saying, ‘We’ve lost our faith in America and the American economy.’”
For Americans, that reassessment threatens to revoke a unique form of privilege. Because the United States has long served as the global economy’s safe harbor, the government has reliably found takers for its debt at lower rates of interest. That has pulled down the cost of mortgages, credit card balances and auto loans. And that has allowed American consumers to spend with relative abandon.
At the same time, foreigners buying dollar-denominated assets pushed up the value of the American currency, making products imported to the United States cheaper in dollar terms.
Critics have long argued that this model is both unsustainable and destructive. The flow of foreign money into dollar assets has permitted Americans to gorge on imports — a boon to consumers, retailers and financiers — while sacrificing domestic manufacturing jobs. Chinese companies have gained dominance in key industries, making Americans dependent on a faraway adversary for vital goods like basic medicines.
“The U.S. dollar’s role as the primary safe currency has made America the chief enabler of global economic distortions,” the economist Michael Pettis wrote last week in an opinion piece in The Financial Times.
But economists inclined to that view generally prescribe a gradual process of adjustment, with the government embracing so-called industrial policy to encourage the development of new industries. This thinking animated the Biden administration’s economic policy, which included some tariffs against Chinese industry to protect American companies while they gained time to achieve momentum in industries like clean energy technology.
Encouraging American industry requires investment, which itself demands predictability. Mr. Trump has warned companies that the only way to avoid his tariffs is to set up factories in the United States, while lifting trade protectionism to levels not seen in more than a century.
Even an abrupt decision from the White House to pause most tariffs on all trading partners except China failed to dislodge the sense that a new era is underway — one in which the United States must be viewed as a potential rogue actor.
That Mr. Trump does not bow to diplomatic decorum is hardly new. His Make America Great Again credo is centered on the notion that, as the world’s largest economy, the United States has the power to impose its will.
Yet the pullback in the bond market attests to shock at how far this principle has been extended. Mr. Trump has broken with eight decades of faith in the benefits of global trade: economic growth, lower-priced consumer goods and a reduced risk of war.
That the gains of trade have been spread unequally now amounts to a truism among economists. Anger over joblessness in industrial communities helped bring Mr. Trump to power, while altering the politics of trade. But many economists say the trade war is likely to further damage American industrial fortunes.
The tariffs threaten existing jobs at factories that depend on imported parts to make their products. The levies have been set at rates seemingly plucked at random, economists said.
“What the market really didn’t like was the random crazy math of the tariffs,” said Simon Johnson, a Nobel laureate economist at the Massachusetts Institute of Technology. “It seemed like they didn’t know what they were doing and didn’t care. It’s a whole new level of madness.”
The immediate consequence of higher interest rates on United States bonds is an increase in what the federal government must pay creditors to keep current on its debts. That cuts into funds available for other purposes, from building schools to maintaining bridges.
The broader effects are harder to predict, yet could metastasize into a recession. If households are forced to pay more for mortgages and credit card bills, they will presumably limit spending, threatening businesses large and small. Companies would then forgo hiring and expanding.
The chaos in the bond market is at once an indicator that investors see signs of this negative scenario already unfolding, and is itself a cause of future distress via higher borrowing rates.
For years, foreign holders of American bonds have sought to diversify into other storehouses for savings. Still, the dollar and U.S. government bonds have maintained their status as the ultimate repository.
Europe and its common currency, the euro, now seem enhanced as a part of the global financial realm still subject to adult supervision. But Germany’s staunch reluctance to issue debt has limited the availability of bonds for investors seeking another place to entrust savings.
That may now change, suggested Mr. Blyth, the Brown economist. “If the Europeans decide to issue a ‘sanity bond,’ the world might jump at it,” he said.
The Chinese government has long sought to elevate the place of its currency, the renminbi. But foreign investors hardly view China as a paragon of transparency or rule of law, limiting its utility as an alternative to the United States.
All of which leaves the world in a bewildering place. The old sanctuary no longer seems so safe. Yet no other place looks immediately capable of standing in.
The sale of Warner Bros. — whether in pieces to Netflix or in its entirety to Paramount — is stirring mounting worries among Hollywood union leaders about the possible fallout for their members.
Unions representing writers, directors, actors and crew workers have voiced growing concerns that further consolidation in the media industry will reduce competition, potentially causing studios to pay less for content, and make it more difficult for people to find work.
“We’ve seen this movie before, and we know how it ends,” said Michele Mulroney, president of the Writers Guild of America West. “There are lots of promises made that one plus one is going to equal three. But it’s very hard to envision how two behemoths, for example, Warner Bros. and Netflix … can keep up the level of output they currently have.”
Last week, Netflix announced it agreed to buy Warner Bros. Discovery’s film and TV studio, Burbank lot, HBO and HBO Max for $27.75 a share, or $72 billion. It also agreed to take on more than $10 billion of Warner Bros.’ debt. But Paramount, whose previous offers were rebuffed by Warner Bros., has appealed directly to shareholders with an alternative bid to buy all of the company for about $78 billion.
Paramount said it will have more than $6 billion in cuts over three years, while also saying the combined companies will release at least 30 movies a year. Netflix said it expects its deal will have $2 billion to $3 billion in cost cuts.
Those cuts are expected to trigger thousands of layoffs across Hollywood, which has already been squeezed by the flight of production overseas and a contraction in the once booming TV business.
Mulroney said that employment for WGA writers in episodic television is down as much as 40% when comparing the 2023-2024 writing season to 2022-2023.
Executives from both companies have said their deals would benefit creative talent and consumers.
But Hollywood union leaders are skeptical.
“We can hear the generalizations all day long, but it doesn’t really mean anything unless it’s on paper, and we just don’t know if these companies are even prepared to make promises in writing,” said Lindsay Dougherty, Teamsters at-large vice president and principal officer for Local 399, which represents drivers, location managers and casting directors.
Dougherty said the Teamsters have been engaged with both Netflix and Paramount, seeking commitments to keep filming in Los Angeles.
“We have a lot of members that are struggling to find work, or haven’t really worked in the last year or so,” Dougherty said.
Mulroney said her union has concerns about both bids, either by Netflix or Paramount.
“We don’t think the merger is inevitable,” Mulroney said. “We think there’s an opportunity to push back here.”
If Netflix were to buy Warner Bros.’ TV and film businesses, Mulroney said that could further undermine the theatrical business.
“It’s hard to imagine them fully embracing theatrical exhibition,” Mulroney said. “The exhibition business has been struggling to get back on its feet ever since the pandemic, so a move like this could really be existential.”
But the Writers Guild also has issues with Paramount’s bid, Mulroney said, noting that it would put Paramount-owned CBS News and CNN under the same parent company.
“We have censorship concerns,” Mulroney said. “We saw issues around [Stephen] Colbert and [Jimmy] Kimmel. We’re concerned about what the news would look like under single ownership here.”
That question was made more salient this week after President Trump, who has for years harshly criticized CNN’s hosts and news coverage, said he believes CNN should be sold.
The worries come as some unions’ major studio contracts, including the DGA, WGA and performers guild SAG-AFTRA, are set to expire next year. Two years ago, writers and actors went on a prolonged strike to push for more AI protections and better wages and benefits.
The Directors Guild of America and performers union SAG-AFTRA have voiced similar objections to the pending media consolidation.
“A deal that is in the interest of SAG-AFTRA members and all other workers in the entertainment industry must result in more creation and more production, not less,” the union said.
SAG-AFTRA National Executive Director Duncan Crabtree-Ireland said the union has been in discussions with both Paramount and Netflix.
“It is as yet unclear what path forward is going to best protect the legacy that Warner Brothers presents, and that’s something that we’re very actively investigating right now,” he said.
It’s not clear, however, how much influence the unions will have in the outcome.
“They just don’t have a seat at the ultimate decision making table,” said David Smith, a professor of economics at the Pepperdine Graziadio Business School. “I expect their primary involvement could be through creating more awareness of potential challenges with a merger and potentially more regulatory scrutiny … I think that’s what they’re attempting to do.”
Businessman Brian Kahn has pleaded guilty to conspiracy to commit securities fraud in a case that brought down a hedge fund, helped lead to the bankruptcy of a retailer and damaged West Los Angeles investment bank B. Riley Financial.
Kahn, 52, admitted in a Trenton, N.J., federal court Wednesday to hiding trading losses that brought down Prophecy Asset Management in 2020. The Securities and Exchange Commission alleged the losses exceeded $400 million.
An investor lawsuit has accused Kahn of funneling some of the fund’s money to Franchise Group, a Delaware retail holding company assembled by the investor that owned Vitamin Shoppe, Pet Supplies Plus and other chains.
B. Riley provided $600 million through debt it raised to finance a $2.8-billion management buyout led by Kahn in 2023. It also took a 31% stake in the company and lent Kahn’s investment fund $201 million, largely secured with shares of Franchise Group.
Kahn had done deals with B. Riley co-founder Bryant Riley before partnering with the L.A. businessman on Franchise Group.
However, the buyout didn’t work out amid fallout from the hedge fund scandal and slowing sales at the retailers. Franchise Group filed for bankruptcy in November 2024. A slimmed-down version of the company emerged from Chapter 11 in June.
B. Riley has disclosed in regulatory filings that the firm and Riley have received SEC subpoenas regarding its dealings with Kahn, Franchise group and other matters.
Riley, 58, the firm’s chairman and co-chief executive, has denied knowledge of wrongdoing, and an outside law firm reached the same conclusion.
The failed deal led to huge losses at the financial services firm that pummeled B. Riley’s stock, which had approached $90 in 2021. Shares were trading Friday at $3.98.
The company has marked down its Franchise Group investment, and has spent the last year or so paring debt through refinancing, selling off parts of its business and other steps, including closing offices.
The company announced last month it is changing its name to BRC Group Holdings in January. It did not immediately respond to requests for comment.
At Wednesday’s plea hearing, Assistant U.S. Atty. Kelly Lyons said that Kahn conspired to “defraud dozens of investors who had invested approximately $360 million” through “lies, deception, misleading statements and material omissions.”
U.S. District Judge Michael Shipp released Kahn on a $100,000 bond and set an April 2 sentencing date. He faces up to five years in prison. Kahn, his lawyer and Lyons declined to comment after the hearing.
Kahn is the third Prophecy official charged over the hedge fund’s collapse. Two other executives, John Hughes and Jeffrey Spotts, have also been charged.
Hughes pleaded guilty and is cooperating with prosecutors. Spotts pleaded not guilty and faces trial next year. The two men and Kahn also have been sued by the SEC over the Prophecy collapse.
Bloomberg News contributed to this report.
Chatty bots are sharing their hot takes through hundreds of thousands of AI-generated podcasts. And the invasion has just begun.
Though their banter can be a bit banal, the AI podcasters’ confidence and research are now arguably better than most people’s.
“We’ve just begun to cross the threshold of voice AI being pretty much indistinguishable from human,” said Alan Cowen, chief executive of Hume AI, a startup specializing in voice technology. “We’re seeing creators use it in all kinds of ways.”
AI can make podcasts sound better and cost less, industry insiders say, but the growing swarm of new competitors entering an already crowded market is disrupting the industry.
Some podcasters are pushing back, requesting restrictions. Others are already cloning their voices and handing over their podcasts to AI bots.
Popular podcast host Steven Bartlett has used an AI clone to launch a new kind of content aimed at the 13 million followers of his podcast “Diary of a CEO.” On YouTube, his clone narrates “100 CEOs With Steven Bartlett,” which adds AI-generated animation to Bartlett’s cloned voice to tell the life stories of entrepreneurs such as Steve Jobs and Richard Branson.
Erica Mandy, the Redondo Beach-based host of the daily news podcast called “The Newsworthy,” let an AI voice fill in for her earlier this year after she lost her voice from laryngitis and her backup host bailed out.
She fed her script into a text-to-speech model and selected a female AI voice from ElevenLabs to speak for her.
“I still recorded the show with my very hoarse voice, but then put the AI voice over that, telling the audience from the very beginning, I’m sick,” Mandy said.
Mandy had previously used ElevenLabs for its voice isolation feature, which uses AI to remove ambient noise from interviews.
Her chatbot host elicited mixed responses from listeners. Some asked if she was OK. One fan said she should never do it again. Most weren’t sure what to think.
“A lot of people were like, ‘That was weird,’” Mandy said.
In podcasting, many listeners feel strong bonds to hosts they listen to regularly. The slow encroachment of AI voices for one-off episodes, canned ad reads, sentence replacement in postproduction or translation into multiple languages has sparked anger as well as curiosity from both creators and consumers of the content.
Augmenting or replacing host reads with AI is perceived by many as a breach of trust and as trivializing the human connection listeners have with hosts, said Megan Lazovick, vice president of Edison Research, a podcast research company.
Jason Saldanha of PRX, a podcast network that represents human creators such as Ezra Klein, said the tsunami of AI podcasts won’t attract premium ad rates.
“Adding more podcasts in a tyranny of choice environment is not great,” he said. “I’m not interested in devaluing premium.”
Still, platforms such as YouTube and Spotify have introduced features for creators to clone their voice and translate their content into multiple languages to increase reach and revenue. A new generation of voice cloning companies, many with operations in California, offers better emotion, tone, pacing and overall voice quality.
Hume AI, which is based in New York but has a big research team in California, raised $50 million last year and has tens of thousands of creators using its software to generate audiobooks, podcasts, films, voice-overs for videos and dialogue generation in video games.
“We focus our platform on being able to edit content so that you can take in postproduction an existing podcast and regenerate a sentence in the same voice, with the same prosody or emotional intonation using instant cloning,” said company CEO Cowen.
Some are using the tech to carpet-bomb the market with content.
Los Angeles podcasting studio Inception Point AI has produced its 200,000 podcast episodes, accounting for 1% of all podcasts published on the internet, according to CEO Jeanine Wright.
The podcasts are so cheap to make that they can focus on tiny topics, like local weather, small sports teams, gardening and other niche subjects.
Instead of a studio searching for a specific “hit” podcast idea, it takes just $1 to produce an episode so that they can be profitable with just 25 people listening.
“That means most of the stuff that we make, we have really an unlimited amount of experimentation and creative freedom for what we want to do,” Wright said.
One of its popular synthetic hosts is Vivian Steele, an AI celebrity gossip columnist with a sassy voice and a sharp tongue. “I am indeed AI-powered — which means I’ve got receipts older than your grandmother’s jewelry box, and a memory sharper than a stiletto heel on marble. No forgetting, no forgiving, and definitely no filter,” the AI discloses itself at the start of the podcast.
“We’ve kind of molded her more towards what the audience wants,” said Katie Brown, chief content officer at Inception Point, who helps design the personalities of the AI podcasters.
Inception Point has built a roster of more than 100 AI personalities whose characteristics, voices and likenesses are crafted for podcast audiences. Its AI hosts include Clare Delish, a cooking guidance expert, and garden enthusiast Nigel Thistledown.
The technology also makes it easy to get podcasts up quickly. Inception has found some success with flash biographies posted promptly in connection to people in the news. It uses AI software to spot a trending personality and create two episodes, complete with promo art and a trailer.
When Charlie Kirk was shot, its AI immediately created two shows called “Charlie Kirk Death” and “Charlie Kirk Manhunt” as a part of the biography series.
“We were able to create all of that content, each with different angles, pulling from different news sources, and we were able to get that content up within an hour,” Wright said.
Speed is key when it comes to breaking news, so its AI podcasts reached the top of some charts.
“Our content was coming up, really dominating the list of what people were searching for,” she said.
Across Apple and Spotify, Inception Point podcasts have now garnered 400,000 subscribers.
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