By Josh Boak
Washington (AP) The last time President Donald Trump imposed such hefty tariffs, his popularity fell, consumer confidence plummeted, and financial markets trembled.
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Three months later, he’s banking that things will be different this time.
Trump is effectively tying the entire global economy to his innate conviction that import levies will result in factory employment and stronger growth in the United States, rather than the inflation and slowdown that many analysts had forecast, with his new round of tariffs announced this week.
He told his Cabinet on Tuesday that previous presidents who had not implemented tariffs firmly were foolish. Trump, ever the salesperson, went on to say that it was faster to send them letters listing the tariff rates on their goods, as he is doing this week, because negotiating trade agreements with the rest of the world was too time-consuming.
A temporary market crash and the 90-day bargaining period with baseline 10% tariffs that ends Wednesday were the results of his self-proclaimed April 2 Liberation Day ceremony at the White House, when he had posterboards with the rates displayed. The letters represented a change from that event. Instead, Trump sent boilerplate letters that were formatted incorrectly and had sporadic capitalization and grammar.
Regarding his letters, Trump claimed that there was a better way. It is a more potent method. We also write them a note. The letter was read by you. It was, in my opinion, nicely written. Most of the time, it’s simply a small figure: You’ll pay 25% or 35%. We have a few at 60 and 70.
Trump had not yet sent a letter imposing a tariff rate of more than 40% on Laos and Myanmar when he made those remarks. In order to limit China’s economic power, he intends to impose 25% tariffs on South Korea and Japan, two important allies and trading partners. Before the higher import taxes are imposed, the leaders of the 14 nations that have already imposed tariffs intend to negotiate over the course of the next three weeks.
According to Trump, I treat them better in every case than they have treated us throughout the years.
His strategy runs counter to the way significant trade deals have been drafted over the past 50 years, which have involved drawn-out discussions that occasionally take years to resolve intricate disputes between countries.
This political and economic gamble has three conceivable outcomes, all of which have the potential to significantly alter global events and Trump’s legacy.
Trump has the ability to defy the majority of economists and deliver on his promise of growth through tariffs. Or, in a rerun of the Trump Always Chickens Out (TACO) phenomena, he might back off on tariffs once more before they begin on August 1. Or he might attack nations that are financially disadvantaged by the tariffs and inflict economic harm that could reverberate against the communities that helped propel him back to the White House last year.
Sen. Ron Wyden, a Democrat from Oregon, claimed that Trump’s letters have prolonged his tariff purgatory for an additional month, thereby immobilizing the American economy while consumers, foreign leaders, and CEOs remain unsure of Trump’s true foreign trade agenda.
According to Wyden, Trump’s TACO negotiation strategy is diminishing the credibility of his threats and decreasing the willingness of our trading partners to even compromise. He isn’t getting any closer to negotiating long-term trade agreements that will benefit American companies and workers.
The S&P 500 stock index is virtually flat Tuesday following a fall on Monday, indicating that the stock and bond markets are now tranquil. Trump’s multitrillion-dollar income tax cuts are a legislative victory. And, encouraged by the fact that inflation has so far decreased rather than increased as many economists and Democratic opponents had predicted, he is boldly imposing tariffs at levels that previously shook international markets.
Wendong Zhang, an economist at Cornell University, stated that although the administration has normalized 25% tariff hikes by floating duties as high as 40% to even 100%, this is still one of the most extreme and disruptive tariff actions in recent history. Ironically, this slow disclosure runs the risk of normalizing tariff increases that would otherwise be regarded as extraordinarily high.
Some only view Trump as a constant source of turmoil, and the letters and their somewhat arbitrary tariff rates demonstrate that his administration lacks a true policymaking process.
According to Desmond Lachman, a senior scholar at the right-leaning think tank American Enterprise Institute, “it’s really just a validation that this policy is all over the place, that they’re running this by the seat of their pants, and that there is no real strategy.”
Trump’s 90-day tariff negotiation deadline is coming to a conclusion, and he has already written letters to 14 nations that impose 25%–40% import duties. During the Cabinet meeting, he stated that he will sign an order on Tuesday to impose 50% tariffs on copper and that pharmaceutical goods may eventually be subject to tariffs of up to 200%. This is in addition to his current 25% auto tariff, 50% steel and aluminum tariff, and separate import duties on China, Canada, and Mexico.
Ben May, a director of global economic research at the consulting firm Oxford Economics, stated that the clear conclusion is that markets are currently not quite convinced that Trump would follow through on it, or else they believe that compromises will be made. That’s most likely the crucial component.
May stated that although the tariffs are unlikely to result in a complete decline in household incomes, they are likely to slow their growth.
Although it’s unclear why he would target countries like Tunisia that have very little trade with the United States, Trump has stated that his tariffs would fix trade imbalances in the United States. According to administration officials, the extension and extension of his 2017 tax cuts, which were signed into law on Friday, will help offset revenue losses by generating trillions of dollars in tariff revenues over the following ten years.
According to the Bipartisan Policy Center, the federal government has already received $98.2 billion in tariff receipts this year, more than twice as much as it did the previous year.
Treasury Secretary Scott Bessent stated during Tuesday’s Cabinet meeting that tariff collections could reach well over $300 billion by the year’s end. We disagree with the Congressional Budget Office’s assessment that tariffs would generate $2.8 trillion over a ten-year period, which we believe is likely low, Bessent continued.
Although it’s unclear how that’s possible—Trump has stated that it would be too complicated to hold all those meetings—the governments of South Africa, Japan, South Korea, Malaysia, Myanmar, Thailand, Cambodia, and Myanmar have all stated that they hope for more tariff talks with him.
Rather, Trump announced on social media Tuesday that the tariffs would begin to be applied on August 1st as planned.
Trump stated on Truth Social that nothing has changed as of this date and that nothing will. Extensions won’t be given. I appreciate you taking the time to look into this.
