Trump’s flip-flopping on tariffs leaves everyone the loser
Trump is continuing to throw more kerosene on America’s blazing financial markets
WASHINGTON DC – As Wall Street traders prepared to return to work on Monday, the Trump White House once again threw more kerosene on America’s blazing financial markets. In comments likely to spark a fresh sell-off when the new trading week gets under way, the Commerce Secretary, Howard Lutnick – architect of Donald Trump’s global trade war – suggested the President’s partial U-turn on tariffs may prove to be short-lived.
Lutnick was speaking specifically about Friday night’s news that Trump had decided to exempt Chinese-made smartphones, laptops and wireless headphones from America’s average 134.7 per cent tariff on Chinese exports. At the time, the White House said those products would merely face duties of 20 per cent — brought in previously on all Chinese imports — but for major US companies including Apple, Google and Garmin, the break offered a glimmer of hope that they might be able to navigate the massive supply chain difficulties that the White House was creating for them.
That hope was extinguished on Sunday, when Lutnick told ABC News that the reprieve would be only temporary. “He’s saying they’re exempt from the reciprocal tariffs”, he announced, saying that Chinese-manufactured electronics would be “included in the semiconductor tariffs which are probably coming in a month or two”.
“Probably” is not a qualifier that America’s trading partners or its titans of commerce find especially comforting. As they search for certainty, stability, and any sign of predictability about the future of Trump’s trade war with China, the White House is offering them nothing in return.
The President himself indicated on Friday indicated that limited exemptions were coming, claiming that “there could be a couple of exceptions for obvious reasons”, although he then failed to explain what those “obvious reasons” might be. Trump has suggested he is acting “instinctively, more than anything else”. Corporate behemoths were effectively invited to lobby Trump personally for specific carve-outs for Chinese-made parts upon which they heavily rely.
Last Wednesday, when Trump announced a partial climb-down from his global trade war, he left 10 per cent across-the-board tariffs in place against the vast majority of America’s trading partners, including the UK. At the time, his loyal lieutenants indicated that China would now become the main target of America’s trade barriers, and in tit-for-tat moves, Beijing raised duties on US exports to 125 per cent, calling Trump’s policies “nothing more than a numbers game with no real economic significance”.
The Treasury Secretary, Scott Bessent, claimed Trump displayed “great courage” by indicating a willingness to negotiate tariff reductions bilaterally with other nations. But in a speech to the National Republican Congressional Committee, Trump then controversially claimed that “countries are calling us up, kissing my ass…dying to make a deal”, remarks reminiscent of his claim this month that when it comes to trade, “the friend is worse than the foe”.
The trade war with China shows no sign of being resolved. Trump has indicated that the Chinese must blink first, insisting that he is awaiting a phone call from President Xi Jinping. CNN reports that for the past two months, US officials have been urging their Chinese interlocutors to make the first move and request a leader-level phone conversation. Xi, who on Friday described China’s economy as being built on “self-reliance and hard work”, appears unwilling to give Trump that particular win.
“China wants to make a deal. They just don’t know how quite to go about it”, Trump told reporters last week. “They’re a proud people”, he said. But like America’s own captains of industry, the Chinese government is also struggling to determine precisely what end game Trump has in mind.
It is unclear whether the US leader still favours the all-out protectionism that – in his telling – could eventually see tariff revenues financing the entire American government in place of income tax. Or whether he favours a medium-term return to the principles of free trade, based on bilateral negotiations with America’s trading partners as, one by one, they cut a deal with him to reduce US barriers.
“Both can be true”, Trump claimed at the White House last Monday. “Tariffs can be permanent, and we can still negotiate,” he told reporters, as they made failed efforts to secure clarity about his position.
He professes to want things both ways, while most economists argue that he’s got to choose between being either a free trader, or a protectionist isolationist. While the President ponders his position, the rollercoaster on America’s financial markets is set to continue, threatening further to upend the retirement and college savings accounts held by millions of Americans.
For the President’s fellow Republicans on Capitol Hill and tech bros who bankrolled his election campaign and subsequent inauguration, it may take yet more lobbying to make Trump’s U-turn a genuine reversal in policy. China continues to decscribe Trump’s policies as “a joke”, and beyond matching him tariff for tariff, evinces little interest in making the first move towards a negotiated settlement.
