As soon as the rumor was discredited, the market began to fall again, although Treasury Secretary Scott Bessent’s announcement that he is opening trade negotiations with Japan and looking forward to talks with other countries appeared to reassure some traders that Trump's tariffs will not last. The wild swings made the day one of the most volatile in stock market history. It ended with the Dow Jones Industrial Average down by 349 points and the S&P 500 and the Nasdaq Composite staying relatively flat. Futures for tomorrow are up slightly.
Foreign markets fared badly today, suggesting that the reality of Trump’s tariffs is beginning to sink in. Sam Goldfarb of the Wall Street Journal notes that Hong Kong’s Hang Seng took its biggest dive since the 1997 Asian financial crisis, losing 13%, and that other markets also fell today.
Goldfarb reports that in the U.S., traders are deeply worried about losses but also anxious about missing a rebound if the administration changes its policies. Hence the extreme volatility of the market. Generally, values over 30 are considered indicators of increased risk and uncertainty in the Chicago Board Options Exchange (CBOE) Volatility Index, the so-called fear gauge. Today, it spiked to 60.
Business leaders are speaking out publicly against Trump’s tariffs. Today, Ken Langone, the co-founder of Home Depot and a major Republican donor, told the Financial Times: “I don’t understand the goddamn formula.”
Senate Republicans are also starting to push back. Seven Republican senators have now signed onto a bill that would limit Trump’s ability to impose tariffs. The power to levy tariffs belongs to Congress, but Congress has permitted a president to adjust tariffs on an emergency basis. Trump declared an emergency, and it is on that ground that he has upended more than 90 years of global economic policy.
Trump has threatened to veto any such legislation, but he will not need to if Senate majority leader John Thune (R-SD) and House speaker Mike Johnson (R-LA) refuse to bring the measure to a vote. Jordain Carney and Meredith Lee Hill of Politico report that while Republicans express concern about the tariffs in private, leaders will stand with the president because they must have the votes of MAGA lawmakers to pass any of their legislative agenda through Congress, and to get that they will need Trump’s support. Others are worried about incurring Trump’s wrath and, with it, a primary challenger.
“People are skittish. They’re all worried about it,” Senator Rand Paul (R-KY) told Carney and Hill. “But they are putting on a stiff upper lip to act as though nothing is happening and hoping it goes away.”
But so far, it does not look as if it’s going to go away. Today the European Commission has announced 25% countertariffs in retaliation for Trump’s tariffs. [But their retaliatory measures are more modest than its initial threats. “Officials are moving slowly and deliberately, avoiding a single sweeping set of retaliatory moves, in hopes of giving the United States time to come to the table to make a deal,” reports the NYT]
Trump’s response to the crisis has been to double down on his tariff plan. This morning he wrote on his social media network that he will impose additional 50% tariffs on China effective on Wednesday unless it drops the retaliatory tariffs it has placed on U.S. products. Rather than backing down, China said it would “fight to the end.”
[For now, most world leaders are trying to bargain their way out of the sweeping new American tariffs. Just two of the 20 largest exporters to the United States have countered them with new tariffs of their own.
How major trade partners are responding
| Status | Trading partner | New tariff | Exports to U.S. | Note |
|---|---|---|---|---|
| Possible retaliation | European Union | +20% | $606 bil. | Preparing to retaliate with wide-ranging levies this week, even as officials also offer concessions and seek to negotiate. |
| No retaliation | Mexico | +25%* | $506 bil. | Faces 25 percent tariffs on some imports, but was exempted from the latest round. |
| Retaliated | China | +34% | $439 bil. | Matched new tariffs by levying an extra 34 percent duty on U.S. imports. |
| Retaliated | Canada | +25%* | $413 bil. | Imposed retaliatory tariffs against a number of U.S. goods as it faces duties on some Canadian goods. |
| Japan | +24% | $148 bil. | Has few options to retaliate, and depends on U.S. military commitments. | |
| Offered concessions | Vietnam | +46% | $137 bil. | Offered to reduce tariffs on U.S. imports to zero. |
| South Korea | +26% | $132 bil. | Sending its trade minister to Washington for talks. | |
| Offered concessions | Taiwan | +32% | $116 bil. | Offering zero tariffs as a starting point for discussion. |
| Offered concessions | India | +27% | $87 bil. | Approved a few concessions in March, like reducing tariffs on bourbon, but has since been relatively silent. |
| United Kingdom | +10% | $68 bil. | Seeking discussions, while drawing up a list of U.S. products it could potentially hit with retaliatory tariffs. | |
| Switzerland | +32% | $63 bil. | “Switzerland cannot comprehend” the tariff calculations, its president said — but officials say they will not retaliate. | |
| Offered concessions | Thailand | +37% | $63 bil. | Offered to increase imports of energy, aircraft and farm products from the United States |
| Malaysia | +24% | $53 bil. | Seeking engagement with the United States, while calling on Asian nations to organize a collective response. | |
| Singapore | +10% | $43 bil. | Officials said they would try to understand U.S. areas of concern. | |
| Brazil | +10% | $42 bil. | Brazil’s president said that the country would try to reach an agreement but that it is preparing possible retaliatory measures. | |
| Offered concessions | Indonesia | +32% | $28 bil. | Offered to buy more U.S. products such as cotton, wheat, oil and gas. |
| Offered concessions | Israel | +17% | $22 bil. | Israel had sought to avert the higher rate by voiding duties on American products — seemingly to no avail. |
| Colombia | +10% | $18 bil. | Colombia’s president said he would respond to tariffs only if they harm job creation in the country. | |
| Turkey | +10% | $17 bil. | The trade minister said his country hoped to get the additional tariff lifted. | |
| Australia | +10% | $17 bil. | The tariffs have “no basis in logic,” the prime minister said. But he said Australia would not retaliate. |
Today, in a press conference convened in the Oval Office, Trump explained his thinking behind why he has begun a global tariff war. "You know, our country was the strongest, believe it or not, from 1870 to 1913. You know why? It was all tariff based. We had no income tax,” he said. “Then in 1913, some genius came up with the idea of let’s charge the people of our country, not foreign countries that are ripping off our country, and the country was never, relatively, was never that kind of wealth. We had so much wealth we didn’t know what to do with our money. We had meetings, we had committees, and these committees worked tirelessly to study one subject: we have so much money, what are going to do with it, who are we going to give it to? And I hope we’re going to be in that position again.”
Aside from this complete misreading of American history—Civil War income taxes lasted until 1875, for example, tariffs are paid by consumers, the Panics of 1873 and 1893 devastated the economy, few Americans at the time thought the Gilded Age was a golden age, and I have no clue what he’s referring to with the talk about committees—Trump’s larger motivation is clear: he wants to get rid of income taxes.
Congress passed the 1913 Revenue Act imposing income taxes to shift the cost of supporting the government from ordinary Americans, especially the women who by then made up a significant portion of household consumers, to men of wealth. Tariffs were regressive because they fell disproportionately on working-class Americans through their everyday purchases. Income taxes spread costs more evenly, according to a man’s ability to pay. The switch from tariffs to income taxes helped to break the power of the so-called robber barons, the powerful industrialists who controlled the U.S. economy and government in the late nineteenth century.
To get rid of income taxes, Trump and his Republicans have backed the decimation of the government services that support ordinary Americans.
Today, in the Oval Office press conference, Trump and Defense Secretary Pete Hegseth suggested where they intend to put government money, promising a defense budget of $1 trillion, a significant jump from the current $892 defense budget. “[W]e have to be strong because you’ve got a lot of bad forces out there now,” Trump said.
Allison McCann, Alexandra Berzon, and Hamed Aleaziz of the New York Times reported today that the administration also intends to spend as much as $45 billion over the next two years on new detention facilities for immigrants. In the last fiscal year, the total amount of federal money allocated to the Immigration and Customs Enforcement was about $3.4 billion. The new facilities will be in private hands and will operate with lower standards and less oversight than current detention facilities.