Trump swerves for tariff off-ramp (phew!)
Still a long way to go, but a move in the right direction.
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A few days ago, I described the smartest next move President Trump could make in his trade war: declare victory and postpone all the tariffs indefinitely.
I also said I expected President Trump to partially make this move by rolling back his trade-stoppingly high tariffs on China. But I didn’t think he’d postpone all the tariffs. Instead, I predicted he would leave America and the world saddled with an onerous and ineffective tariff regime that increases U.S. prices (inflation), invites retaliation, and hurts American companies.
So far, that prediction seems to be on track.
Yesterday, both President Trump and Treasury Secretary Bessent suggested that the China tariffs would be reduced. And today, the Wall Street Journal reports that the White House is considering slashing those tariffs by half or more — to around 50%-60%, down from the current 145%. Also, thankfully, Pres Trump said he is not planning to fire Fed Chair Jerome Powell, thus preserving the Fed’s independence for at least another day. And markets are breathing a sigh of relief.
Americans should be relieved by both of these developments. We should also hope Pres Trump rolls back his trade war even further.
Specifically, we should hope President Trump indefinitely suspends all tariffs on all countries and reverts to the pre-trade-war status quo while trade negotiations unfold (which may take years). We should also hope he assembles a team of trade experts to craft a thoughtful, long-term U.S. trade plan — one designed to “re-shore” strategic industries, create well-paid manufacturing jobs, and build greater economic resilience against future supply chain disruptions.
This reindustrialization plan might still include some targeted tariffs, narrowly focused on specific sectors or countries. It would almost certainly involve strategic investments in domestic production in certain key industries (chips, for example). But such a plan should be phased in over many years — not sprung on the country and world overnight. American businesses and workers need time to adjust.
The “declare victory” part is also important, because it will give President Trump political cover. Pres Trump is not constrained by facts—so it doesn’t matter whether the declaration is accurate. And Americans, relieved that the trade war is (at least temporarily) over, likely won’t care if a few economists or media outlets declare that he “caved.”
Why should Americans be relieved? Because a suspension means fewer trade-war-induced layoffs, lower prices, less recession risk, and continued access to the products, services, and materials we depend on.
Unfortunately, President Trump has not yet taken that step.
So far, he’s only suspended most of the so-called “reciprocal tariffs,” and only for 90 days. (Real trade agreements, even with friendly partners, often take years to negotiate. Ninety days isn’t enough time to land “great new deals”—unless the goal is a few headline-friendly gifts.)
Meanwhile, a 10% tariff on nearly all imports remains in place, along with 25% tariffs on cars and steel. And China—one of our biggest trading partners—may still face 50%-60% tariffs.
That’s too bad.
Even the reduced tariffs remain higher than anything America has seen since the disastrous Smoot-Hawley tariffs of the 1930s. Some of the new levies also target allies like Mexico, Canada, and the UK. And many are actively hurting American companies—both here and abroad.
Also concerning: President Trump is strongly signaling that he won’t roll back these tariffs completely, regardless of how negotiations go.
But wait—don’t tariffs help America?
Don’t they generate tax revenue? Don’t they encourage domestic manufacturing?
It’s complicated, but most economists and investors think the tariffs are a net negative.
The tariffs do generate some tax revenue — about $250 million a day, according to Grace Eliza Goodwin at Business Insider, citing the Treasury Department — but they will also cause negative economic effects that will hurt Americans and American companies and offset this benefit. For example, the cost of most tariffs will likely be passed through to U.S. consumers and businesses in the form of higher prices. Inflation will hurt Americans’ purchasing power and cause them to buy less stuff — which, in turn, will slow unit growth and reduce sales taxes. Because of retaliation by trading partners, American exporters will be hurt, which will cause layoffs. And U.S. economic growth will slow, which will reduce tax revenue.
Most economists—liberal and conservative—agree that broad-based, high tariffs hurt the country imposing them. For deeper dives, see Paul Krugman, Noah Smith, or even conservatives like Oren Cass, who supports the 10% tariff, but not the China ones. Or just look at your 401(k): it’s probably down since the tariffs began.
That’s not coincidence. The stock, bond, and currency markets reflect a real-time global consensus on future growth and prosperity. Every time President Trump threatens more tariffs or signals disregard for U.S. financial discipline, markets fall. Every time he backs off, they rebound.
Trade policy is complex and often boring. China doesn’t always “play fair.” Millions of Americans have seen good jobs go overseas—and they’re angry, with reason.
These problems deserve real attention. And to his credit, President Trump has helped shine a light on them.
But there are far smarter, more effective ways to address these issues than launching a sudden, chaotic, broad-based trade war.
So I’ll say it again: I hope President Trump declares victory—and suspends all the tariffs.
This post was edited by Tess Ellery, Regenerator’s “native-AI” President and Managing Editor. She’s part of our “native-AI newsroom” experiment in which we co-created her and our other colleagues with ChatGPT. I should have asked Tess to edit the post describing the first part of that experiment (building the team), too. In hindsight, it was verbose and self-indulgent and sometimes struck the wrong tone (my fault!). Thanks to Tess, future Regenerator posts will be better-edited.
Thank you for reading and subscribing to Regenerator! We’re the publication for people who want to build a better future. We analyze the most important questions in innovation — tech, business, markets, policy, culture, and ideas. Please send letters/emails at letters@regenerator1.com. We love to publish smart, thoughtful notes we think our readers will enjoy and learn from. Also, my own inbox and mind are always open! hblodget@regenerator1.com.