After several weeks of tough talk and rising tensions, President Trump backed down. He backed down multiple times.
He withdrew his threat to dismiss the chairman of the Federal Reserve. His Treasury Secretary, knowing the S&P 500 had dropped 10 percent since Trump’s inauguration, indicated he was searching for a way to ease the escalating trade conflict with China.
Moreover, Trump has recognized that the 145 percent tariffs on Chinese imports he announced recently are not feasible. This realization came partly due to warnings from executives at Target, Walmart, and other major retailers that consumers would soon face rising prices and shortages on some imported items.
Trump’s confrontation with reality served as a clear illustration of the political and economic fallout from taking an extreme stance. He entered this trade conflict hoping that imposing harsh tariffs would compel global companies to establish factories in the U.S.
Now, at the end of the month, he is learning that modern supply chains are far more complicated than he imagined, and it’s uncertain whether his “great” tariffs will produce the anticipated outcomes.
However, the White House is portraying a different narrative about recent events. Trump’s aides claim that his aggressive demands are part of a smart strategy that has compelled 90 countries to engage with him. They acknowledge that it may take months to see any concessions but maintain that shaping the global trading system according to U.S. interests requires time.
“Be patient, and you’ll see,” the president’s press secretary, Karoline Leavitt, told reporters on Wednesday.
Trump himself assured reporters that everything was proceeding as planned.
“There is a lot happening,” he remarked, reiterating his now-familiar statement that “we will not be a laughingstock that has been taken advantage of by almost every nation.” He suggested again that the U.S. should revert to the prosperous period from 1870 to 1913 — the year income taxes were introduced — when tariffs financed the government and “we had more money than anyone else.”
And he reiterated his belief that “now we’ll start making money with everyone, and everyone will be happy.”
Yet, the atmosphere around the White House seemed anything but happy recently.
It began with Trump’s claim that the removal of Fed Chair Jerome H. Powell, whom he appointed in 2017, “cannot come quickly enough.” His top economic advisor, Kevin Hassett, went so far as to say the administration was exploring legal ways to dismiss him.
Trump’s grievance is that Powell refuses to lower interest rates, fearing it might ignite inflation. However, the president was clearly worried by economists’ warnings that the nation could be heading toward a recession — one of his own making, which critics are already labeling the Trump Slump before it even happens.
The tone of his remarks seemed to imply that if a recession does occur, Powell will be blamed.
But once Trump stated, “if I want him out, he’ll be gone pretty quickly, believe me,” another market downturn began. It did not matter that Trump doesn’t have the authority to fire the Fed chair, as Powell has recently pointed out. The mere suggestion of it seemed to heighten perceptions that the U.S. has become a major source of market instability globally.
Then, on Tuesday, Trump shifted his stance. “I have no plans to fire him,” he said about Powell. Although he continued to criticize Powell as “Mr. Late” regarding rate cuts, his words were enough to halt the market decline.
The next reversal came concerning China.
The White House hinted that China was starting to negotiate to resolve the tariff situation. However, it appeared that Beijing was simply waiting for Trump to experience the repercussions of his decisions. Anticipated phone calls from President Xi Jinping didn’t materialize, and Trump was reluctant to initiate contact, which looked desperate.
For weeks, Treasury Secretary Scott Bessent seemed visibly stressed as he tried to justify tariffs that, by many standards, surpass those imposed by the Smoot-Hawley Act of 1930. (No one in the White House wants to acknowledge this historical comparison, except to dismiss it as incorrect — the cycle of retaliation from that legislation worsened the Great Depression.)
“No one believes the current situation is viable” with those tariff levels, Bessent told investors at a closed-door meeting in Washington, where his comments leaked immediately. He expressed a desire for a de-escalation with China, which “should give the world and markets a sigh of relief.” However, he acknowledged that any negotiations would be slow and challenging.
Privately, some Trump officials admit they underestimated China’s response. Trump seemed to assume that China would be among the first to seek relief due to its large exports to the U.S.
“When Trump first imposed tariffs on China in 2017, Beijing was relatively surprised,” said Nicholas Mulder, an economic historian at Cornell University. “But they have been preparing for further escalations for years,” he added. Now, “they have much greater tolerance for economic hardship and a better capability to handle this increase in tension.”
By late Tuesday, Trump was openly considering lowering the tariffs on China, stating, “145 percent is very high, and it won’t stay that high.” He remarked, “It got that way,” implying it wasn’t his fault.
On Wednesday, Leavitt clarified that Trump would not reduce tariffs until the U.S. and China reached a new trade agreement — sending mixed signals about the state of negotiations.
“Let me be clear: There will be no unilateral tariff cuts against China,” Leavitt told Fox News.
Other nations are clearly observing China’s strategy and taking notes. President Vladimir V. Putin of Russia, a close ally of Xi, is engaged in his own high-stakes discussions with the U.S. regarding Ukraine. Iran is also in talks concerning its nuclear program. They’re looking for weaknesses or small signs that could test Trump’s patience.
Elizabeth Economy, who has extensively researched Chinese trade policy and worked in the Commerce Department under the Biden administration, noted that the Trump administration seemed to have overlooked three critical factors about China: the breadth of Chinese retaliatory mechanisms, the degree of China’s economic influence over the U.S., and Xi’s ability to blame the U.S. for China’s economic troubles.
“This standoff has only allowed Xi Jinping to enhance his reputation both domestically and internationally while the U.S. appears misinformed and adrift,” she stated.
