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Trump’s Tariff Turmoil
Why Did Trump Back Down?
Uncertainty Remains
According to the Financial Times, Trump initially announced a 10% tariff on all imported goods on April 2, with tariffs as high as 104% on specific countries such as China. Trump referred to this as “Liberation Day,” aiming to reshape the global trading system. However, this policy triggered a continuous decline in stock markets across various countries, extending this week to massive sell-offs in the U.S. bond market, resulting in the 10-year Treasury yield recently rising to 4.5%, indicating increased investor concerns over economic prospects and inflation.
In a speech on Wednesday, Trump stated that he had noticed the turmoil in the bond market, saying, “The bond market is tricky; I’ve been watching… people are starting to feel a bit uneasy.” Trump admitted that he made this decision earlier that morning, as market participants seemed “a bit too worried,” and described the pause as “heartfelt.” He also revealed that Jamie Dimon, CEO of JPMorgan Chase, had warned during an interview on FOX Business that the U.S. might be heading towards a recession, which influenced his decision. Jamie Dimon stated at that time:
“I have a calm view, but if we don’t make progress here, things could get worse.”
In addition, critical voices began to emerge within the Republican Party, even from some investors and business magnates who supported Trump. This includes tech billionaire and senior White House advisor Elon Musk, who has increasingly resisted Trump’s extreme protectionism.
Market analysts believe this shift indicates Trump’s lingering concerns about the backlash from the financial markets. Dec Mullarkey, head of SLC Asset Management, commented:
“This proves that he pays attention to the markets and realizes he has gone too far. The market itself still has strength and will not be intimidated.”
A source close to the White House added that Trump does not mind Wall Street taking a hit, but he does not want the entire house to come crashing down.
Treasury Secretary Scott Bessent has been appointed to lead negotiations with trading partners, and he attempted to frame this shift as part of the president’s established strategy. Scott Bessent stated outside the White House that he discussed this matter with Trump in Florida on Sunday and called the events of the past week “reflective of the president’s consistent strategy,” which has prompted “over 75 countries to come to the negotiating table.” He emphasized that the U.S. would engage in dialogue with a “sincere” attitude.
However, reactions from business groups and the opposition have been mixed. Jake Colvin of the National Foreign Trade Council stated:
“While this temporary pause may alleviate immediate pain, it does not reduce the uncertainty businesses face regarding trade and investment.”
He called for the government to further ease tensions, eliminate tariffs, and rebuild trust. Illinois Senator Dick Durbin criticized, saying:
“The chaos and real damage of Trump’s tariffs will not disappear in 90 days; he has created global chaos at the expense of American families and businesses.”
Market data indicates that the sell-off of U.S. bonds has drawn wide attention. Former Treasury Secretary Lawrence Summers warned that this could evolve into a financial crisis. Although the Federal Reserve has not publicly announced specific responses, analysts expect that if the sell-off continues to drive yields higher, the Fed may consider rate cuts or restarting bond purchases in the coming months to stabilize the financial markets.
Currently, tariffs on China remain unchanged, and the 10% tariffs on other countries have not been lifted. The outcome of negotiations over the next 90 days will be a focal point for the market. Whether Trump’s compromise can quell market turmoil remains to be seen.