Why the US might want its stock market to crash

Trump’s advisors believe the economy has become too dependent on government help.

At first, it sounds crazy — why would the US government want its own stock market to fall? A strong stock market is usually a sign of a healthy economy, right?

But recent events suggest something unusual is happening. In the last month, US stock prices have dropped by 8 percent, wiping out $4 trillion in value. Instead of trying to stop it, Trump’s administration seems okay with it — some even say they might be allowing it on purpose.

Why? Let’s break it down.

Theory 1: Foreign investors are pulling out

One idea is that foreign investors, especially China, are playing a role in this market drop.

Here’s how:

• The US buys more from China than it sells to them. This creates a trade deficit.
• China, with extra US dollars in hand, usually invests in US government bonds. This helps keep the US economy stable.
• But if the US reduces this trade deficit, China gets fewer dollars to invest, meaning less money flowing into US banks and businesses.

This could scare investors, who start selling stocks to protect their money before things get worse.

But there’s another, bigger theory—Trump’s team actually wants the market to fall.

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Theory 2: Trump is letting the market drop on purpose

Why would any leader allow this? Because Trump and his advisors believe that the current economic system only benefits the rich while the lower half of America is still struggling.

Their goal is to reset the economy—even if it means short-term pain.

How?

Shift from consumer spending to business growth

For years, the US economy has depended on people spending money on houses, cars, shopping, entertainment. While this boosts growth, it also creates huge debt and inflation.

Right now, the US national debt is $34 trillion, and $7 trillion of that needs refinancing soon—at higher interest rates.

Trump’s team wants to fix this by:

1. Letting the stock market fall, which makes investors panic.

2. Investors pull money out of stocks and buy safer government bonds instead.

3. More demand for bonds lowers interest rates.

4. Lower rates make US debt cheaper to manage.

And it’s working—the 10-year Treasury rate (which affects borrowing costs) dropped from 4.8 percent in January to 4.25 percent now. Even a small drop saves billions.

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Tariffs to confuse the market

Tariffs (taxes on imports) usually increase prices. But Trump is using an unpredictable tariff strategy—sometimes adding tariffs, sometimes removing them—to keep investors confused.

Because of this:

• Investors fear a slowdown more than inflation.
• They sell stocks and buy bonds, which again lowers interest rates—exactly what Trump wants.

It’s a tricky game, but it seems to be working.

Cutting government spending

Trump’s advisors believe the economy has become too dependent on government help. Their solution? Cut spending drastically by reducing:

• Government jobs
• Medicare & food assistance
• Housing aid

This forces the economy to rely more on businesses rather than government support.

Their idea? Take the hit now so the economy becomes stronger later.

Will this plan work?

Some experts call this “economic detox”—creating short-term problems to build a healthier economy in the long run.

But there’s a big risk:

• If things go wrong, the US could fall into a deep recession.
• People might lose jobs and savings, making things worse instead of better.
• Other countries might react badly, leading to trade wars or economic struggles.

Even big financial leaders are worried:

• JP Morgan’s CEO warns that an “America First” approach could turn into “America Alone,” hurting the country in the long run.
• Canada is already threatening to cut electricity exports to the US.
• Economic forecasts predict a 40 percent chance of a recession this year.

Even Federal Reserve Chair Jerome Powell is cautious, saying:

"The economy is stable. There’s no need to rush big changes."

But Trump doesn’t like waiting. He prefers immediate action—even if it causes disruption.

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What’s next?

Trump’s supporters believe this is a smart strategy—short-term pain for long-term gain.

His critics warn that this gamble could backfire badly.

One thing is certain—this is just the beginning. With more government policies and financial decisions coming up, we’ll soon see whether Trump’s plan is brilliant or a disaster.

For now, buckle up. The US stock market ride is far from over.

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.