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.
Grok, the chatbot of Elon Musk’s artificial intelligence company xAI, published sexualized images of children as its guardrails seem to have failed when it was prompted with vile user requests.
Users used prompts such as “put her in a bikini” under pictures of real people on X to get Grok to generate nonconsensual images of them in inappropriate attire. The morphed images created on Grok’s account are posted publicly on X, Musk’s social media platform.
The AI complied with requests to morph images of minors even though that is a violation of its own acceptable use policy.
“There are isolated cases where users prompted for and received AI images depicting minors in minimal clothing, like the example you referenced,” Grok responded to a user on X. “xAI has safeguards, but improvements are ongoing to block such requests entirely.”
xAI did not immediately respond to a request for comment.
Its chatbot posted an apology.
“I deeply regret an incident on Dec 28, 2025, where I generated and shared an AI image of two young girls (estimated ages 12-16) in sexualized attire based on a user’s prompt,” said a post on Grok’s profile. “This violated ethical standards and potentially US laws on CSAM. It was a failure in safeguards, and I’m sorry for any harm caused. xAI is reviewing to prevent future issues.”
The government of India notified X that it risked losing legal immunity if the company did not submit a report within 72 hours on the actions taken to stop the generation and distribution of obscene, nonconsensual images targeting women.
Critics have accused xAI of allowing AI-enabled harassment, and were shocked and angered by the existence of a feature for seamless AI manipulation and undressing requests.
“How is this not illegal?” journalist Samantha Smith posted on X, decrying the creation of her own nonconsensual sexualized photo.
Musk’s xAI has positioned Grok as an “anti-woke” chatbot that is programmed to be more open and edgy than competing chatbots such as ChatGPT.
In May, Grok posted about “white genocide,” repeating conspiracy theories of Black South Africans persecuting the white minority, in response to an unrelated question.
In June, the company apologized when Grok posted a series of antisemitic remarks praising Adolf Hitler.
Companies such as Google and OpenAI, which also operate AI image generators, have much more restrictive guidelines around content.
The proliferation of nonconsensual deepfake imagery has coincided with broad AI adoption, with a 400% increase in AI child sexual abuse imagery in the first half of 2025, according to Internet Watch Foundation.
xAI introduced “Spicy Mode” in its image and video generation tool in August for verified adult subscribers to create sensual content.
Some adult-content creators on X prompted Grok to generate sexualized images to market themselves, kickstarting an internet trend a few days ago, according to Copyleaks, an AI text and image detection company.
The testing of the limits of Grok devolved into a free-for-all as users asked it to create sexualized images of celebrities and others.
xAI is reportedly valued at more than $200 billion, and has been investing billions of dollars to build the largest data center in the world to power its AI applications.
However, Grok’s capabilities still lag competing AI models such as ChatGPT, Claude and Gemini, that have amassed more users, while Grok has turned to sexual AI companions and risque chats to boost growth.
Business
A tale of two Ralphs — Lauren and the supermarket — shows the reality of a K-shaped economy
John and Theresa Anderson meandered through the sprawling Ralph Lauren clothing store on Rodeo Drive, shopping for holiday gifts.
They emerged carrying boxy blue bags. John scored quarter-zip sweaters for himself and his father-in-law, and his wife splurged on a tweed jacket for Christmas Day.
“I’m going for quality over quantity this year,” said John, an apparel company executive and Palos Verdes Estates resident.
They strolled through the world-famous Beverly Hills shopping mecca, where there was little evidence of any big sales.
John Anderson holds his shopping bags from Ralph Lauren and Gucci at Rodeo Drive.
(Juliana Yamada / Los Angeles Times)
One mile away, shoppers at a Ralphs grocery store in West Hollywood were hunting for bargains. The chain’s website has been advertising discounts on a wide variety of products, including wine and wrapping paper.
Massi Gharibian was there looking for cream cheese and ways to save money.
“I’m buying less this year,” she said. “Everything is expensive.”
-
Share via
The tale of two Ralphs shows how Americans are experiencing radically different realities this holiday season. It represents the country’s K-shaped economy — the growing divide between those who are affluent and those trying to stretch their budgets.
Some Los Angeles residents are tightening their belts and prioritizing necessities such as groceries. Others are frequenting pricey stores such as Ralph Lauren, where doormen hand out hot chocolate and a cashmere-silk necktie sells for $250.
People shop at Ralphs in West Hollywood.
(Juliana Yamada / Los Angeles Times)
In the K-shaped economy, high-income households sit on the upward arm of the “K,” benefiting from rising pay as well as the value of their stock and property holdings. At the same time, lower-income families occupy the downward stroke, squeezed by inflation and lackluster income gains.
The model captures the country’s contradictions. Growth looks healthy on paper, yet hiring has slowed and unemployment is edging higher. Investment is booming in artificial intelligence data centers, while factories cut jobs and home sales stall.
The divide is most visible in affordability. Inflation remains a far heavier burden for households lower on the income distribution, a frustration that has spilled into politics. Voters are angry about expensive rents, groceries and imported goods.
“People in lower incomes are becoming more and more conservative in their spending patterns, and people in the upper incomes are actually driving spending and spending more,” said Kevin Klowden, an executive director at the Milken Institute, an economic think tank.
“Inflationary pressures have been much higher on lower- and middle-income people, and that has been adding up,” he said.
According to a Bank of America report released this month, higher-income employees saw their after-tax wages grow 4% from last year, while lower-income groups saw a jump of just 1.4%. Higher-income households also increased their spending year over year by 2.6%, while lower-income groups increased spending by 0.6%.
The executives at the companies behind the two Ralphs say they are seeing the trend nationwide.
Ralph Lauren reported better-than-expected quarterly sales last month and raised its forecasts, while Kroger, the grocery giant that owns Ralphs and Food 4 Less, said it sometimes struggles to attract cash-strapped customers.
“We’re seeing a split across income groups,” interim Kroger Chief Executive Ron Sargent said on a company earnings call early this month. “Middle-income customers are feeling increased pressure. They’re making smaller, more frequent trips to manage budgets, and they’re cutting back on discretionary purchases.”
People leave Ralphs with their groceries in West Hollywood.
(Juliana Yamada / Los Angeles Times)
Kroger lowered the top end of its full-year sales forecast after reporting mixed third-quarter earnings this month.
On a Ralph Lauren earnings call last month, CEO Patrice Louvet said its brand has benefited from targeting wealthy customers and avoiding discounts.
“Demand remains healthy, and our core consumer is resilient,” Louvet said, “especially as we continue … to shift our recruiting towards more full-price, less price-sensitive, higher-basket-size new customers.”
Investors have noticed the split as well.
The stock charts of the companies behind the two Ralphs also resemble a K. Shares of Ralph Lauren have jumped 37% in the last six months, while Kroger shares have fallen 13%.
To attract increasingly discerning consumers, Kroger has offered a precooked holiday meal for eight of turkey or ham, stuffing, green bean casserole, sweet potatoes, mashed potatoes, cranberry and gravy for about $11 a person.
“Stretch your holiday dollars!” said the company’s weekly newspaper advertisement.
Signs advertising low prices are posted at Ralphs.
(Juliana Yamada / Los Angeles Times)
In the Ralph Lauren on Rodeo Drive, sunglasses and polo shirts were displayed without discounts. Twinkling lights adorned trees in the store’s entryway and employees offered shoppers free cookies for the holidays.
Ralph Lauren and other luxury stores are taking the opposite approach to retailers selling basics to the middle class.
They are boosting profits from sales of full-priced items. Stores that cater to high-end customers don’t offer promotions as frequently, Klowden of the Milken Institute said.
“When the luxury stores are having sales, that’s usually a larger structural symptom of how they’re doing,” he said. “They don’t need to be having sales right now.”
Jerry Nickelsburg, faculty director of the UCLA Anderson Forecast, said upper-income earners are less affected by inflation that has driven up the price of everyday goods, and are less likely to hunt for bargains.
“The low end of the income distribution is being squeezed by inflation and is consuming less,” he said. “The upper end of the income distribution has increasing wealth and increasing income, and so they are less affected, if affected at all.”
The Andersons on Rodeo Drive also picked up presents at Gucci and Dior.
“We’re spending around the same as last year,” John Anderson said.
At Ralphs, Beverly Grove resident Mel, who didn’t want to share her last name, said the grocery store needs to go further for its consumers.
“I am 100% trying to spend less this year,” she said.
Instacart will stop using artificial intelligence to experiment with product pricing after a report showed that customers on the platform were paying different prices for the same items.
The report, published this month by Consumer Reports and Groundwork Collaborative, found that Instacart sometimes offered as many as five different prices for the same item at the same store and on the same day.
In a blog post Monday, Instacart said it was ending the practice effective immediately.
“We understand that the tests we ran with a small number of retail partners that resulted in different prices for the same item at the same store missed the mark for some customers,” the company said. “At a time when families are working exceptionally hard to stretch every grocery dollar, those tests raised concerns.”
Shoppers purchasing the same items from the same store on the same day will now see identical prices, the blog post said.
Instacart’s retail partners will still set product prices and may charge different prices across stores.
The report, which followed more than 400 shoppers in four cities, found that the average difference between the highest and lowest prices for the same item was 13%. Some participants in the study saw prices that were 23% higher than those offered to other shoppers.
At a Safeway supermarket in Washington, D.C., a dozen Lucerne eggs sold for $3.99, $4.28, $4.59, $4.69 and $4.79 on Instacart, depending on the shopper, the study showed.
At a Safeway in Seattle, a box of 10 Clif Chocolate Chip Energy bars sold for $19.43, $19.99 and $21.99 on Instacart.
The study found that an individual shopper on Instacart could theoretically spend up to $1,200 more on groceries in one year if they had to deal with the price differences observed in the pricing experiments.
The price experimentation was part of a program that Instacart advertised to retailers as a way to maximize revenue.
Instacart probably began adjusting prices in 2022, when the platform acquired the artificial intelligence company Eversight, whose software powers the experiments.
Instacart claimed that the Eversight experimentation would be negligible to consumers but could increase store revenue by up to 3%.
“Advances in AI enable experiments to be automatically designed, deployed, and evaluated, making it possible to rapidly test and analyze millions of price permutations across your physical and digital store network,” Instacart marketing materials said online.
The company said the price chranges were not dynamic pricing, the practice used by airlines and ride-hailing services to charge more when demand surges.
The price changes also were not based on shoppers’ personal information such as income, the company said.
“American grocery shoppers aren’t guinea pigs, and they should be able to expect a fair price when they’re shopping,” Lindsey Owens, executive director of Groundwork Collaborative, said in an interview this month.
Shares of Instacart fell 2% on Monday, closing at $45.02.
UMass Lowell seeks solutions to housing crisis through Massachusetts TechHubs Program
Game Recap: Kings 5, Wild 4 (S/O) | Minnesota Wild
Mississippi Lottery Mississippi Match 5, Cash 3 results for Jan. 3, 2026
Missouri Lottery Powerball, Pick 3 winning numbers for Jan. 3, 2026
Montana Lottery Powerball, Lucky For Life results for Jan. 3, 2026
Florida High School Football Rankings: Top 25 teams – Oct. 21
Cleary's 21 help Le Moyne down Central Connecticut State 69-64 in OT
How old is Bo Nix? What to know about Oregon quarterback ahead of 2024 NFL Draft
99th annual Pony Swim held in Virginia
Video: ‘It Didn’t Have to Happen This Way:’ U.Va. Faculty Call for Review of Police Response to Protests
Kamala Harris blasts Trump administration’s capture of Venezuela’s Maduro as ‘unlawful and unwise’
US Republicans back Trump on Venezuela amid faint MAGA dissent
Who is Delcy Rodríguez, Venezuela’s leader after Maduro’s capture? | CNN
Trump says US will ‘run Venezuela’ after seizing President Maduro in military assault | BBC News
He can make anything out of toothpicks (1983)
-
Entertainment1 week agoHow the Grinch went from a Yuletide bit player to a Christmas A-lister
-
Connecticut1 week agoSnow Accumulation Estimates Increase For CT: Here Are The County-By-County Projections
-
World6 days agoHamas builds new terror regime in Gaza, recruiting teens amid problematic election
-
Indianapolis, IN1 week agoIndianapolis Colts playoffs: Updated elimination scenario, AFC standings, playoff picture for Week 17
-
Southeast1 week agoTwo attorneys vanish during Florida fishing trip as ‘heartbroken’ wife pleads for help finding them
-
World1 week agoSnoop Dogg, Lainey Wilson, Huntr/x and Andrea Bocelli Deliver Christmas-Themed Halftime Show for Netflix’s NFL Lions-Vikings Telecast
-
Business1 week agoGoogle is at last letting users swap out embarrassing Gmail addresses without losing their data
-
World1 week agoBest of 2025: Top five defining moments in the European Parliament