President Donald Trump’s partial — and possibly temporary — retreat from the most radical version of his trade agenda sent the stock markets soaring. But it’s important to remember that prior to Trump’s inauguration, the tariff regime we are currently under was widely considered the worst-case scenario.
Recall that during the 2024 campaign, Trump promised to impose a 10 percent tariff on all foreign goods, and a 60 percent tariff on Chinese ones.
Investors widely considered such a policy too unhinged to be serious. Future Trump Treasury Secretary Scott Bessent assured Bloomberg TV in August that the Republican candidate’s ostensible trade agenda was merely a negotiating tactic, saying, “President Trump speaks like a New York City real estate developer, and that is the opening gambit. . . . It is a maximalist negotiating position.”
It’s worth dwelling on this quote: America’s current trade policy — a 10 percent universal tariff that could jump higher in 90 days, 25 percent tariffs on most Canadian and Mexican goods, as well as a 125 percent tariff on China — is more radical than what Bessent deemed a maximalist negotiating position last summer.
For ordinary Americans, it is also an incredibly costly policy. According to an estimate from the Peterson Institute for International Economics, a 10 percent universal tariff combined with a 60 tariff on Chinese goods would cost the typical U.S. household “at least $1,700 in increased taxes each year.” Trump’s current agenda would cost that household even more.
If Trump maintains his current trade policy, America’s economic pain will only mount in the coming weeks and months. But bulls on Wall Street are betting that a broader retreat is coming.
Granted, Trump’s announcement on Wednesday potentially establishes a foundation for further tariff reductions. He has already pulled the universal rate down to 10 percent, and says he is looking to “negotiate a solution” to his trade concerns with 75 countries. Presumably, if he does reach such a solution with these nations, he will bring tariffs on their imports below 10 percent.
Look at all this through rose-colored glasses, and you see a path back to the pro-business, moderately protectionist Republican presidency that Wall Street thought it was getting.
Nevertheless, Trump backing down further on tariffs is no safe bet. As he has made clear in recent days, he believes that the United States should run a trade surplus in goods with every country on the planet.
So long as Trump maintains this belief, it is hard to see how he negotiates resolutions with major trade partners. Countries cannot easily control whether they run trade surpluses, which are influenced by complex patterns of consumption and investment that governments do not dictate.
What’s more, as of Tuesday, many countries were trying to negotiate with the United States but getting no response from the administration — a sign that the president’s purported interest in striking deals may not be sincere.
Even if the White House is genuinely interested in negotiations, it’s unclear what top trade partners, most of whom do not actually impose wild tariffs on U.S. products, can offer. It’s possible that Trump is comfortable with minor, face-saving concessions that he can frame as triumphs. But in recent weeks, he has signaled more sweeping ambitions.
Trump told reporters, “You know it would be nice to serve a nice, easy term. But we have an opportunity to change the fabric of our country. We have an opportunity to reset the table on trade.”
Trump cannot run for another term. So it would make some sense for him to put his ideological objectives above his political interests.
Regardless, his waffling will only reinforce business’s uncertainty about the trajectory of U.S. policy. And when firms are uncertain whether their costs will imminently surge or fall, they tend to postpone investments in new factories or stores, thereby depressing economic growth.
The U.S. stepped back from the cliff’s edge. But we still aren’t far from the precipice. And it’s unclear which direction Trump intends to take us from here.
Eric Levitz is a senior correspondent at Vox.com.
