Trump Caves on Tariffs
The good news is that Trump agreed to end the trade war he started with China reducing Tariffs to 30% for 90 days. China reduced tariffs on imports from the US to 10%, In exchange China agreed to discuss things. For 90 days Tariffs are the status quo before “American Independence day” plus 10%.
Of course Trump will say that the 90 day pause is just time to negotiate on the issues which justified his original 54% tariff (most of the 145% tariff was macho you hit me, I will hit you harder with a spiral of China raising tariffs on US goods then Trump retaliating to the retaliation) principally Chinese subsidies to exporters. In practice the 90 days of uncertainty will either be followed by a deal with symbolic concessionslike the US/UK outline of a possible deal, or with a further period of pause and uncertainty.
It is a very good thing that Trump backed down (for 90 days). I hope and believe that he has recognized the huge cost of cutting off imports from China and will not impose huge tariffs if China concedes nothing or almost nothing during the 90 days. I expect Xi to concede very little, as it has become clear that Trump can mainly threaten to shoot himself in the foot.
The uncertainty will be costly – many firms will wait and see what happens after 90 days before investing. This is in addition to the uncertainty from the remaining 59 days of the April 90 day pause on “reciprocal” tariffs on other counties. It is impossible to predict Trump’s behavior. I hope he realizes that they were a mistake, but no one can predict what Trump will do, hence the costly uncertainty.
Tariffs on imports from China remain very high (even during the 90 days). This will cause a small increase in inflation (US imports from China are huge compared to almost anything except US GDP) but I think the main costs of Trump are increased uncertainty.
Without a tariff firewall, the millions and millions and millions of lost U.S. jobs to mass offshoring to foreign nations and mass outsourcing to foreign companies which U.S. companies are presently engaged in are never coming back to the U.S. to rebuild the lives of American workers who would also pay far more in taxes that would dramatically reduce the non-entitlement welfare spending currently going on across the country and balance government budgets. Fact.
@American,
Americans pay tariffs. It is a consumption tax in America. Trump’s tariffs are costing jobs. Fact.
American: unemployment rate can’t be much lower than it is. This casts doubt on your claim about non-entitlement welfare spending. Also such spending is low already.
Across the board tariffs (also on coffee beans) are a silly way to support industry. Subsidies for manufacturing sectors with high growth potential (as in China and the US CHIPS act, a bipartisan bill signed by Biden) make more sense.
So, basically Trump slaps China with 30% tariffs and the stock market is actually up year over year. I’d say that’s a pretty good deal. Regardless of the “blinking”.
@Matt,
I thought the tariff on China was 145%. Wonder if the 30% tariff will last any longer. LOL!
“US inflation slowed to its lowest rate in more than four years (2021), an unexpected and welcome development at a time when President Donald Trump’s dramatically escalated tariffs are expected to cause prices to rise.”
Inflation slowed more than expected in April, despite tariff-related price pressures building