Eric Lee/The New York Times
When it comes to tariffs, President Trump is a creature of habit.
He first rolls out new levies with bluster. He claims they will solve a major problem: They’ll help stop fentanyl trafficking across the Mexican and Canadian borders. They’ll bring back manufacturing. They’ll rebalance trade. They’ll collect trillions in revenue.
Soon, the markets panic. Investors worry about the higher prices and lower economic growth that tariffs will cause. Stocks tank. Business leaders call the White House to complain — or, worse, vent publicly about Trump and his methods.
Then, the president rolls back his plans. We reached that final stage yesterday. Trump paused his so-called reciprocal tariffs on every nation but China for 90 days. The move leaves a universal 10 percent tariff on all other countries except Canada and Mexico, which face separate duties. But it undoes some of the most shocking tolls — 20 percent on the European Union, 24 percent on Japan, 46 percent on Vietnam.
Markets rallied at the news. The S&P 500, which had flirted with bear-market territory, shot up almost 10 percent. But stocks haven’t fully recovered from the chaotic “Liberation Day” announcement last week, and the United States remains in an open trade war with China, which faces a 125 percent penalty on its goods. And what happens when the pause ends? Today’s newsletter looks at the fallout from this latest tariff episode.
Unclear goals
The Port of Los Angeles. Maggie Shannon for The New York Times
From the start, the president has faced one key question about his plan: What’s the point?
On the campaign trail, Trump spoke about the need for tariffs to revitalize U.S. manufacturing, and JD Vance fantasized about once again making toasters in America. Trump also said the tolls would bring in tax revenue.
But neither of these goals — manufacturing and revenue — is achievable unless the tariffs remain in place. Manufacturers won’t shift production back to the United States if they think the incentive to do so will soon disappear.
Some of Trump’s allies have built a different case for tariffs: that they are a negotiating tactic, one that gets other countries to remove their own trade barriers against the United States. But this implies that the tariffs are fleeting and will vanish when Trump lands new trade deals.
In other words, the stated goals contradict each other.
Trump’s announcement yesterday muddled things further. On one hand, Trump and his cabinet said that the pause would give them time to complete new trade deals, suggesting that they were a negotiating tactic. On the other hand, Trump is keeping the 10 percent universal tariffs. Are they now permanent? The administration hasn’t provided a clear answer.
If the intention was hard to parse, so were the methods. “Only an hour or so ago, Scott Bessent, the Treasury secretary, stood in front of the White House and said that the reversal on tariffs was the president’s strategy ‘all along,’” my colleague Ben Casselman wrote yesterday. “Now Trump himself is saying that he made the decision in response to the market turmoil.”
One reason for the mixed message is disagreement within the administration. [Behind the scenes, senior members of Mr. Trump’s team had feared a financial panic that could spiral out of control and potentially devastate the economy. Treasury Secretary Scott Bessent and others on the president’s team, including Vice President JD Vance, had been pushing for a more structured approach to the trade conflict that would focus on isolating China as the worst actor while still sending a broader message that Mr. Trump was serious about cracking down on trade imbalances.]
Over the weekend, Bessent pressed Trump to use the tariffs to get concessions. (He said the president “is the most deft negotiator there is,” according to an inside look at White House deliberations that my colleagues published yesterday.) Trump refused, believing the market pain was “short-term.” He changed his mind after the bond market faltered.
What’s next
Once the pause ends in 90 days, we could go through another round of economic chaos. That kind of uncertainty has rattled markets throughout Trump’s second term, and it will likely continue as long as the tariff threat looms.
It’s easy to forget, but Trump’s original idea on the campaign trail — the one that alarmed economists to begin with — was a universal 10 percent tariff. Now he has it. That levy is still one of the largest tax hikes since World War II. It will lead to higher prices and slower growth, and poorer Americans will disproportionately pay for it. The United States will suffer more from the ensuing trade war than any other major economy besides Mexico, experts estimate.
Trump has undone some of the expected damage by abandoning his plan, for now. But America still taxes trade much more than it did before Trump’s presidency — and that will continue to roil the world’s economy.
More on tariffs
China makes lots of the clothing Americans buy, as well as toys and electronics. Here’s a guide to how the tariffs could affect prices.
Ratings at Fox Business and CNBC have soared.
Canada expects to raise billions from retaliatory tariffs, and it has promised to use the money to help companies under threat from the U.S.
Trump’s auto tariff hasn’t changed. People in the English town of Solihull, where Jaguar Land Rover employs thousands, are stressed.
Trump spared Russia from tariffs. But falling oil prices could hurt its economy even more. Plunge in Oil Prices Threatens Russia’s Vast Spending on Ukraine War The lower revenues, a result in part of President Trump’s trade war, could prove more damaging to the Russian economy than the penalties the United States and its allies have already imposed.
China makes lots of the clothing Americans buy, as well as toys and electronics. Here’s a guide to how the tariffs could affect prices.
Ratings at Fox Business and CNBC have soared.
Canada expects to raise billions from retaliatory tariffs, and it has promised to use the money to help companies under threat from the U.S.
Trump’s auto tariff hasn’t changed. People in the English town of Solihull, where Jaguar Land Rover employs thousands, are stressed.
Trump spared Russia from tariffs. But falling oil prices could hurt its economy even more. Plunge in Oil Prices Threatens Russia’s Vast Spending on Ukraine War The lower revenues, a result in part of President Trump’s trade war, could prove more damaging to the Russian economy than the penalties the United States and its allies have already imposed.