Trump’s retreat

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.

Markets Fall Again. Trump Imposes 104% Tariff on China. Even Billionaire Republicans incl Musk are Getting Restive

Stocks were up early today as traders put their hopes in Treasury Secretary Scott Bessent’s suggestion that the Trump administration was open to negotiations for lowering Trump’s proposed tariffs. But then U.S. Trade Representative Jamieson Greer said there would not be exemptions from the tariffs for individual products or companies, and President Donald J. Trump said he was going forward with 104% tariffs on China, effective at 12:01 am on Wednesday.

Markets fell again. By the end of the day, the Dow Jones Industrial Average had fallen by another 320 points, or 0.8%, a 52-week low. The S&P 500 fell 1.6% and the Nasdaq Composite fell 2.2%.

Rob Copeland, Maureen Farrell, and Lauren Hirsch of the New York Times reported today that over the weekend, Wall Street billionaires tried desperately and unsuccessfully to change Trump’s mind on tariffs. This week they have begun to go public, calling out what they call the “stupidity” of the new measures. These industry leaders, the reporters write, did not expect Trump to place such high tariffs on so many products and are shocked to find themselves outside the corridors of power where the tariff decisions have been made.

Elon Musk is one of the people Trump is ignoring to side with Peter Navarro, his senior counselor for trade and manufacturing. Navarro went to prison for refusing to answer a congressional subpoena for information regarding Trump’s attempt to overturn the 2020 presidential election. Since Musk poured $290 million into getting Trump elected in 2024 and then burst into the news with his “Department of Government Efficiency,” he has seemed to be in control of the administration. But he has stolen the limelight from Trump, and it appears Trump’s patience with him might be wearing thin.

Elizabeth Dwoskin, Faiz Siddiqui, Pranshu Verma, and Trisha Thadani of the Washington Post reported today that Musk was among those who worked over the weekend to get Trump to end his new tariffs. When Musk failed to change the president’s mind, he took to social media to attack Navarro personally, saying the trade advisor is “truly a moron,” and “dumber than a sack of bricks.”

Asked about the public fight between two of Trump’s advisors—two of the most powerful men in the world—White House press secretary Karoline Leavitt told reporters: “Boys will be boys.”

Business interests hard hit by the proposed tariffs are less inclined to dismiss the men in the administration as madcap kids. They are certainly not letting Musk shift the blame for the economic crisis off Trump and onto Navarro. The right-wing New Civil Liberties Alliance, which is backed by billionaire Republican donor Charles Koch, has filed a lawsuit claiming that Trump’s tariffs against China are not permitted under the law. It argues that the president’s claim that he can impose sweeping tariffs by using the International Emergency Economic Powers Act (IEEPA) is misguided. It notes that the Constitution gives to Congress, not the president, the power to levy tariffs.

With Trump’s extraordinary tariffs now threatening the global economy, some of those who once cheered on his dictatorial impulses are now recalling the checks and balances they were previously willing to undermine.

Today the editors of the right-wing National Review urged Congress to take back the power it has ceded to Trump, calling it “preposterous that a single person could enjoy this much power over…the global economy.” They decried the ”raw chaos” of the last week that has made it impossible for any business to plan for the future.

“What has happened since last Thursday is hard to fathom,” they write. “Based on an ever-shifting series of rationales, characterized by an embarrassing methodology, and punctuated with an extraordinary arrogance toward the country’s constitutional order, the Trump administration has alienated our global allies, discombobulated our domestic businesses, decimated our capital markets, and increased the likelihood of serious recession.” While this should worry all Americans, they write, Republicans in particular should remember that in less than two years, they “will be judged in large part on whether the president who shares their brand has done a good job.”

“No free man wants to be at the mercy of a king,” they write.

Senator Rand Paul (R-KY) told the Senate yesterday: “I don’t care if the president is a Republican or a Democrat. I don’t want to live under emergency rule. I don’t want to live where my representatives cannot speak for me and have a check and balance on power.”

Adam Cancryn and Myah Ward reported in Politico today that Republican leaders are worried about Trump’s voters abandoning him as prices go up and their savings and jobs disappear. After all, voters elected Trump at least in part because he promised to lower inflation and spur the economy. “It’s a question of what the pain threshold is for the American people and the Republican voters,” one of Trump’s economic advisors told the reporters. “We’ve all lost a lot of money.”

MAGA influencers have begun to talk of the tariffs as a way to make the United States “manly” again, by bringing old-time manufacturing and mining back to the U.S. Writer Rotimi Adeoye today noted MAGA’s glorification of physical labor as a sort of moral purification. Adeoye points out how MAGA performs an identity that fetishizes “rural life, manual labor, and a kind of fake rugged masculinity.” That image—and the tradwife image that complements it—recalls an imagined American past. In reality, the 1960s manufacturing economy MAGA influencers appear to be celebrating depended on high rates of unionization and taxation, and on government investing heavily in infrastructure, including healthcare and education.

Adeoye notes that Trump is marketing the image of a world in which ordinary workers had a shot at prosperity, but his tariffs will not bring that world back.

Now Trump is demonstrating his power over the global economy, rejecting the conviction of past American leaders that true power and prosperity rest in cooperation. Trump has always seen power as a zero-sum game in which for one party to win, others must lose, so he appears incapable of understanding that global trade does not mean the U.S. is getting “ripped off.” Now he appears unconcerned that other countries could work together against the U.S. and seems to assume they will have to do what he says.

We’ll see.

For his part, Trump appears to be enjoying that he is now undoubtedly the center of attention. Asked to make “dinner remarks” at the National Republican Congressional Committee tonight, he spoke for close to two hours. Discussing the tariffs, he delivered a story with the “sir” marker that indicates the story is false: “These countries are calling us up. Kissing my ass,” he told the audience. “They are dying to make a deal. “Please, please, sir, make a deal. I’ll do anything. I’ll do anything, sir. And then I’ll see some rebel Republican, you know, some guy that wants to grandstand, saying: ‘I think that Congress should take over negotiations.’ Let me tell you: you don’t negotiate like I negotiate.”

Dow Jones & NASDAQ Keeps Dropping. Does Trump Want to Replace the IRS with Tariffs Like it was 1913?

Major indexes on the stock market began down more than 3% today when, as Allison Morrow of CNN reported, a rumor that Trump was considering delaying his tariffs by three months sent stocks surging upward by almost 8%. The rumor was unfounded—it appeared to begin from a small account on X—but it indicated how desperate traders are to see an end to President Donald J. Trump’s trade war.

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.
Trying to negotiate	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.
Trying to negotiate	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.
Trying to negotiate	United Kingdom	+10%	$68 bil.	Seeking discussions, while drawing up a list of U.S. products it could potentially hit with retaliatory tariffs.
Trying to negotiate	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
Trying to negotiate	Malaysia	+24%	$53 bil.	Seeking engagement with the United States, while calling on Asian nations to organize a collective response.
Trying to negotiate	Singapore	+10%	$43 bil.	Officials said they would try to understand U.S. areas of concern.
Trying to negotiate	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.
Trying to negotiate	Colombia	+10%	$18 bil.	Colombia’s president said he would respond to tariffs only if they harm job creation in the country.
Trying to negotiate	Turkey	+10%	$17 bil.	The trade minister said his country hoped to get the additional tariff lifted.
Trying to negotiate	Australia	+10%	$17 bil.	The tariffs have “no basis in logic,” the prime minister said. But he said Australia would not retaliate.

The New York Times]

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.