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Donald Trump just did the economic equivalent of Control-Alt-Delete on his trade policy. No, he didn’t fully retreat but he
backed down enough that he’s ceded almost all of his leverage. That does not mean he admitted the
chaos he
unfurled was an entirely unnecessary self-inflicted
trauma—or that he fully understands his role in sending the global economy into a freefall for more than a month.
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Before jetting off to the Middle East, the President on Monday climbed down from a scorched-earth tariff tift and pulled import taxes on goods coming from China from an eye-popping 145% down to a less harsh 30%. In turn, China downgraded its retaliation to 10% from 125%, giving legions of U.S. businesses hope that they could weather a standoff between two global leaders famous for their unbending nature.
The added costs will still squeeze Americans who rely on cheap goods from China for day-to-day life, while the world’s two largest economies try to find a way out of their spiraling tit-for-tat standoff that roiled markets, shook consumer confidence, and shrunk the retirement accounts of millions of Americans. Even with the latest turnaround, U.S. consumers may still see some empty shelves in the coming weeks as the supply chain falls off the cliff. And the average American family would still see a net hike of $2,300, according to a new Yale Budget Lab
analysis released after Trump’s announcement. And, later Monday, White House aides
said the shift was not on
all China imports; low-dollar packages from online retailers like Shein and Temu would actually see their surcharges jump in June.
Still, ever the salesman, Trump started a victory lap well past the starting line.
"There's a big incentive for China to stop, and I take them at their word they're going to work on that, I think, very hard,” Trump told reporters at the White House on Monday.
Trusting China has never been a good bet for U.S. policy. Taking Beijing “at their word” is for most Presidents code for being a sucker when it comes to promises of human rights, environmental safeguards, and global ambitions. Trump's stance runs completely counter to orthodoxy popularized by President Ronald Reagan: trust but verify.
But U.S. investors for the moment are putting their trust in Trump’s ability to steer the economy out of a potential nosedive and toward a safe landing. Markets broadly surged as the Dow recouped its post-
"Liberation Day" losses sparked by Trump’s slapdash score settling.
Since April 2, investors have been in open revolt over the tumult. At its lowest point, the Dow was down 14% from the day Trump took office. Before the pause was announced after trade talks in Geneva, the Dow was still down 6% from Inauguration Day levels. By the time markets closed on Monday, the rebound was complete, with traders actually up from January thanks to the biggest day of gains since tariffs tanked confidence.
Trump, who has long shown an obsession with the stock markets as much as his polls, surely is taking the response as a win. The President’s unique flavor of grievance prompts him to see the U.S. economy as a perpetual victim of economic bullies and the bearer of bad actors. His protectionist advisers have encouraged his suspicions. But he also seeks approval, and whether it’s from polls or Wall Street’s Big Board, he reacts. His decision to pull back so strongly from the tariff stance he took just a few weeks ago showed just how reactionary and transactional this President can be.
Still, Trump’s retreat on tariffs with China is not complete. Ninety days is some breathing room for consumers and investors alike, but it’s not forever. China is
painting the reversal as a victory on its side, likely nursing more resentment from Trump and his nationalistic pride. Trump’s defenders, meanwhile, are noting that the United States
collected more than $7 billion on import taxes in April compared to a month earlier.
Now comes the spin contest. During his first term in office, Trump often used Potemkin announcements to declare victory in the hopes no one would follow up on the tangibles. Just look at the Foxconn
project in Wisconsin: Trump promised 13,000 jobs and $10 billion investment there in 2017 and hyped it pretty relentlessly but it never came to pass. It was the same on his now-punchlined Infrastructure Week, a repeal of Obamacare, and a raise in family incomes by $4,000. None of that happened
, either.
But here’s the thing with Trump and his followers: they often listen to the loudest voice in their ears, and it’s tough to credibly argue that anyone can project further than this President. That’s why this fallback on tariffs might be seen for a good chunk of this country as a victory despite evidence to the contrary. Facts—and 401(k) reports—may say one thing, but feelings have always shown more powerful than hard realities.
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