- In today’s CEO Daily: Diane Brady on how the tariffs are punishing Vietnam.
- The big story: Trump’s trade war has triggered fear of a liquidity crisis and people are calling for the Fed to step in.
- The markets: Everything is down, badly. Except China!
- Analyst notes from Apollo on the basis trade in Treasuries, JPMorgan on recession, Stocklytics on X’s declining ad reach.
- Plus: All the news and watercooler chat from Fortune.
Good morning. I wasn’t the only one who was shocked to see Vietnam tagged as one of President Trump’s worst offenders, slapped with a 46% tariff. I remember when I first went to Vietnam as a young reporter for a U.S. newspaper, I was struck by its beauty and the excitement people felt about opening up their battered economy to foreign investment. There were plenty of Americans roaming around to help them do it, inspired by potential profits—and perhaps a sense of obligation from the pain that country endured during the Vietnam War.
Few countries will suffer more from the tariffs than Vietnam and those who do business with it. Trade counselor Peter Navarro dismissed Vietnam’s offer to remove all tariffs on U.S. products, saying it’s the “non-tariff cheating that matters.” The country’s proximity to China, physically and psychologically, was a boon for brands like Gap, Lululemon and Nike, who wanted to derisk their supply chains in a cost-effective manner. Now, of course, those stocks are among the hardest hit.
I recall the excitement back in 2023 when Vietnamese electric car maker VinFast debuted on the Nasdaq with a $23 billion valuation. It was building a manufacturing plant in North Carolina and hoped to compete with Tesla on product and price. Around that time, the then-CEO Le Thi Thu Thuy told me that the real test would be with consumers.
Consumers have not been won over just yet: the company has racked up almost $10 billion in losses. Its stock is now trading at roughly half its IPO price. But interestingly, there have been notable changes in Vietnam as a result of the growth of companies like VinFast. They’ve helped Vietnam’s economy boom, which has led to the creation of minimum wage laws and higher living standards there. Those factors have, in turn, helped the population in Vietnam become bigger consumers of U.S. products.
If the relationship between the U.S. and Vietnam unwinds, it’s hard to see how either side emerges a winner.
More news below.
Contact CEO Daily via Diane Brady at diane.brady@fortune.com
Top news
It’s Day 1 of Trump’s trade war. “Liberation Day” tariffs went into effect at midnight Eastern time, imposing steep new taxes on goods from all countries doing trade with the U.S. The tariffs include a 104% tax on Chinese goods and a minimum of 10% for everyone else. This morning, China promised a “resolute and forceful” response.
It’s a disaster in the stock markets. The S&P 500 lost another 1.6% yesterday and now sits at 4,982.77, down from a high of 6,144.15 earlier this year. This morning, the Nikkei 225 in Japan lost another 4%. Europe is also getting wiped out — the Euro Stoxx 600 was down 3.4% in this morning’s trading.
iPhone maker’s stock halted three times. Shares of Foxconn, the Taiwan-based maker of Apple’s iPhones, have fallen so fast that trading in its stock was halted three times in the last three days.
China, however, is doing well. The SSE Composite Index rose 1.3% today.
But the real story is in the bond market. The selloff has reached Treasuries. The 10-year US Treasury yield — which Trump wants to go down — briefly went up to 4.51% after rising from 3.9%. (Yields rise when bond prices decline.) Government bonds are supposed to be a safe haven but investors are selling those as well, presumably because they need the cash. Ed Yardeni said the “Trump administration may be playing with liquid nitro.”
Ark Invest’s Cathie Wood is worried that there are “serious liquidity issues in the US banking system. This crisis is calling out for some kind of Mar-a-Lago Accord on free trade, in tandem with serious support from the Fed?”
“This is about liquidity.” Reuters: “[Bond] investors are dumping even their safest assets as a global market rout unleashed by U.S. tariffs takes an unnerving turn towards forced selling and a dash for the safety of cash. ‘This is beyond fundamentals right now. This is about liquidity,’ said Jack Chambers, senior rates strategist at ANZ in Sydney.”
“This could turn into a full-blown crisis.” Hedge funds often make money by exploiting the difference in price between Treasuries and futures contracts, the so-called basis trade. “Hedge funds have trillions tied up in this kind of strategy,” said Nick Lawson, chief executive of investment group Ocean Wall. “As things spiral, they’re being forced to sell anything they can — even good assets — just to stay afloat . . . if the Federal Reserve doesn’t step in soon, this could turn into a full-blown crisis. It’s that serious.”
Trump is losing the brosphere. The FT has an entertaining roundup of quotes from pro-Trump podcasters like Dave Portnoy complaining about how much money they have lost due to the market crash.
Elon Musk has gone to war against Peter Navarro, Trump’s trade adviser, calling him a “moron.”
Some Republicans in Congress are willing to support a bill that would sunset the tariffs after 60 days. Sen. Rand Paul (R-Ky.) said his Republican colleagues are hesitant in private about Trump’s new tariffs. “They whisper in my ear, ‘free trade is good’ … But they don’t want to say it because of the politics of it,” Paul said.
Bessent: Countries lining up to negotiate. Treasury Secretary Scott Bessent said that “up to 70 countries” have reached out to the White House to negotiate better trade conditions. The statement came in response to reports that Bessent had asked President Trump over the weekend to make sure the priority for tariffs would be to negotiate better trade deals.
DOJ pivots from crypto. The U.S. Department of Justice is disbanding the National Cryptocurrency Enforcement Team, a task force established under Joe Biden focused on crypto-related investigations. A DOJ spokesperson pointed Fortune to this memo.
From the analysts:
- Apollo on risk in the basis trade: “The basis is the difference in price between a Treasury security and a Treasury futures contract with similar characteristics. … the large and growing cash-futures basis trade, driven by leveraged hedge fund positions in Treasuries, poses a risk due to potential market disruptions and liquidity issues, especially in the event of an exogenous shock or increasing Treasury supply,” per Torsten Sløk.
- JPMorgan predicts a recession: “Michael Feroli, Chief U.S. Economist, forecasts that ‘an extremely hawkish change in trade policy has led us to project the economy will slip into recession,’ adding: “For the full year (4Q/4Q) we now look for real GDP growth of -0.3%, down from 1.3% previously. … we look for contractions in 3Q and 4Q. The recession in economic activity is projected to push the unemployment rate up to 5.3% ... lifted our full-year core PCE inflation forecast by 1.4%-points to 4.4%.”
- Wedbush on U.S. tech: “It’s very easy to say ‘build in America’ behind a microphone in the Beltway...the reality is so much different it’s almost a scary concept. It takes 4-5 years to build a factory in the U.S., the U.S. labor force and cost structure goes against the entire concept of the modern supply chain, much of the IP and technology fueling the supply chain is cemented in Asia, and the reality this ‘near-term pain’ would take a decade to even move the needle,” Daniel Ives.
- Stocklytics on X: “X ad reach has dropped by a considerable 12% in a single year, reaching 586 million in January. … Statistics show the platform’s ad reach dropped by a massive 80 million since October 2023, when it stood at 666 million. Moreover, the platform has faced nearly 15 months of continuous decline, suggesting a long-term trend,” the company says.
Around the watercooler
TodayTix CEO took over at 31. He tells aspirational Gen Zers to ditch the ‘fake it till you make it’ act if they actually want to be successful by Orianna Rosa Royle
Trump economic officials revere billionaire Stanley Druckenmiller, but he says he does not support tariffs over 10% by Greg McKenna