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Donald Trump’s recent actions on trade are akin to a system reboot. While not a complete reversal, the adjustments significantly diminish his negotiating power with China. This doesn’t imply an admission that his trade policies were needless or that he fully grasps his role in the recent global economic instability.
Before departing for the Middle East, Trump scaled back tariffs on Chinese goods from a potential 145% to a more manageable 30%. Consequently, China reduced its retaliatory tariffs from 125% to 10%, offering U.S. businesses some relief amid the tensions between the two major economies.
Despite this, American consumers who depend on affordable Chinese goods will still feel the impact. The two largest economies are attempting to resolve a trade dispute that has destabilized markets, lowered consumer confidence, and negatively impacted retirement savings. Even with the revised tariffs, supply chain disruptions could lead to some shortages in the U.S. A Yale Budget Lab analysis suggests that the average American family could still see an increase of $2,300 in expenses. Furthermore, White House officials clarified that the tariff adjustments would not apply to all Chinese imports, with increased surcharges expected on low-value packages from online retailers like Shein and Temu in June.
Nevertheless, Trump has already begun to celebrate this as a victory.
“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.
For the U.S., trusting China has historically been risky. Presidents are usually skeptical of Beijing’s promises regarding human rights, environmental protection, and international ambitions. Trump’s approach contrasts with the “trust but verify” principle popularized by President Ronald Reagan.
However, U.S. investors currently seem confident in Trump’s ability to navigate the economy away from a potential downturn. Markets generally rose, recovering losses caused by Trump’s initial trade actions.
Since April 2, investor anxiety has been evident. At its lowest point, the Dow had fallen 14% from when Trump assumed office. Before the pause in trade tensions announced after talks in Geneva, the Dow remained 6% below Inauguration Day levels. By the close of markets on Monday, the rebound was complete, with traders showing gains since January following the biggest day of recovery since tariffs dampened confidence.
Trump, known for his focus on stock market performance, likely views this response as a positive outcome. He often perceives the U.S. economy as being victimized by unfair economic practices. While his protectionist advisors reinforce these views, he also seeks approval, reacting to both poll numbers and Wall Street’s performance. His recent decision to reduce tariffs demonstrates his reactive and transactional approach.
However, Trump’s tariff pullback is not total. The 90-day window provides some relief to consumers and investors, but it is not permanent. China might interpret this reversal as a win, potentially fueling resentment from Trump. Meanwhile, Trump’s supporters highlight that the United States collected over $7 billion in import taxes in April, an increase from the previous month.
Now, a battle of narratives begins. During his first term, Trump frequently made premature victory declarations. For example, the Foxconn deal in Wisconsin, where Trump promised 13,000 jobs and a $10 billion investment, never materialized. Similar outcomes occurred with “Infrastructure Week,” the repeal of Obamacare, and the promised $4,000 increase in family incomes.
Ultimately, Trump’s supporters tend to follow the loudest voice, and it’s difficult to argue that anyone can project further than this President. Consequently, this tariff rollback may be perceived as a victory by many, despite evidence to the contrary. While data and financial reports may suggest otherwise, emotions often outweigh facts.
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