On the menu today: Well, we now know exactly what it takes to get President Trump to announce that almost all his previously announced tariffs are, for the next 90 days, lowered to 10 percent. Yesterday’s Morning Jolt headline, “Trump’s Tariffs Will Be Around for a While,” was posted at 10:19 a.m. Eastern. The president announced a 90-day pause on the higher tariffs on Truth Social at 1:18 p.m. If I had known that’s all it took, I would have written it earlier.*
Trump Hits Pause for at Least 90 Days . . . as of This Writing
We’re in a much better place than we were 24 hours ago, even if it’s still a mess. Instead of a slew of retaliatory tariffs that made no sense, we have a 10 percent minimum tariff on all imports, non-USMCA trade with Canada and Mexico is still to be taxed at 25 percent (the “fentanyl” tariff), and the tariff rate on Chinese goods is now up to around 125 percent. And as NR’s editors note, “there are also sector-specific tariffs on industries such as pharmaceuticals and metals that are yet to be announced.” (Of course, based on the record of this president, all of this is subject to change and the next post on Truth Social.)
That’s all still too complicated, with tariffs too high. But at least the markets rebounded and the Trump team recognizes that the previous plan for maximalist tariffs was freaking out both the stock markets and the bond markets. The New York Post’s Charles Gasparino has a good, easy-to-understand explanation:
The US has $36 trillion in bonds in circulation, much of it in foreign hands, that we use to finance government operations.
The bond market is also the plumbing of the economy because it also sets interest rates on consumer and business loans.
If the US can’t sell its debt, it can’t pay for stuff like Social Security, the military or plug our enormous deficit.
In other words, when bond prices fall and their interest rates spike, it could spell economic disaster.
That’s what the bond market was signaling Tuesday night, real panic as the yield on the 10-year bond shot to 4.51%; the yield on the 30-year bond jumped above 5%.
Someone was unloading bonds en masse amid the trade turmoil.
A recent Treasury auction didn’t go so well, adding to upheaval.
Market experts speculated hedge funds were unwinding some complex trades.
Even worse, I was told by the CEO of a major financial institution that one of our biggest foreign holders of treasuries, the Japanese, were unloading US debt in huge quantities.
Many fingers pointed to China, our long-term adversary economically and militarily, but it was a friendly country, selling in huge quantities and sending interest rates into dangerous territory.
That type of instability clearly made an impression on [Treasury Secretary Scott] Bessent, I am told.
Then there’s this detail in the reporting of the Wall Street Journal:
The message delivered to Trump and his top advisers by chief executives was they needed to find an off ramp.
Trump played his cards close to his vest. He told advisers that he was willing to take “pain,” a person who spoke to him on Monday said. He privately acknowledged that his trade policy could trigger a recession but said he wanted to be sure it didn’t cause a depression, according to people familiar with the conversations.
Banking executives—frustrated at their apparent lack of influence with administration officials—turned to Republican lawmakers in recent days to lobby Trump on the tariffs, according to people familiar with the matter. Their message was that Trump was going to tank the economy. [Emphasis added.]
Hey, what’s a little recession among friends?
I was going to write that Americans completely get why we would impose tariffs on China; I’m generally a free trader, but I’m also a China hawk. And as we saw during the crackdown on Hong Kong, our extensive ties with China have brought Chinese values to American society rather than American values to Chinese society. (This is how we ended up with “Google Uighurs” signs being seized and removed at NBA games.) Beijing’s intentions are hostile, and it seeks to expand Chinese power and influence and minimize our power and influence in the Pacific.
When it comes to China, I think we need an economic “conscious uncoupling,” as Gwyneth Paltrow would put it. Xi Jinping, you need to understand that we’re opening up our relationship to other exporters — Vietnam, in particular. We’ve decided to see other Asian communists.
The U.S. defense-industrial base needs to make sure nothing in its production comes from China, particularly telecommunications or aerospace hardware or software equipment.
The good news is that China produces only 7 percent of active pharmaceutical ingredients consumed by Americans. The bad news is that China makes 90 percent of our generic antibiotics.
(By the way, if the Trump administration wants to get tough on China, why is TikTok still operating when there’s a law on the books declaring it must be shut down?)
But Americans may not be as supportive of high tariffs on Chinese goods as I thought. The latest numbers from the Pew Research Center indicate that twice as many Americans think higher tariffs on China will be bad for the country as those who think they will be good.
Around half of Americans (52 percent) anticipate this change will be bad for the U.S. and a nearly identical share (53 percent) say they will be bad for them personally.
Around a quarter of Americans (24 percent) think the increased tariffs on China will be good for the country. About half as many (10 percent) think they will be good for them personally.
Roughly one-in-five Americans are unsure about the potential impact of these tariffs, both on the country and their own lives. When it comes to their own lives, some say these tariffs will have no effect either way (17 percent).
Earlier in the week I pointed out the strange contradictions in the explanations from the Trump team: Peter Navarro, the White House senior counselor on trade and manufacturing, insisted the tariffs were not part of a negotiation, while Kevin Hassett, director of the White House National Economic Council, insisted they were. Bessent insisted that the tariffs were a new long-lasting supply of revenue to offset the extension of the tax cuts, while Commerce Secretary Howard Lutnick insisted they were primarily a national security policy tool.
Stephen Covey once wrote the maxim “Begin with the end in mind.” What are we attempting to do with these new tariffs? As Representative Lloyd Smucker (R., Pa.) put the question to U.S. Trade Representative Jamieson Greer: “What is the end goal here?
Is our goal to economically decouple from China? Then our tariffs should focus on Beijing. Yes, a certain amount of Chinese goods gets sent through Vietnam so those goods can then be sent to America. But Vietnam also produces a lot of its own goods! This one study puts the figure at about 72 percent — and if you slap a tariff on all Vietnamese imported goods in order to hit China, you’re also hitting all the goods producers in Vietnam.
Is it to increase U.S. exports? We should probably begin with a realistic expectation of how much we can export to each particular country. Yesterday’s newsletter mentioned Burundi: We probably shouldn’t expect the world’s poorest countries to spend a lot of money on U.S.-made goods. They’re not going to be able to afford a lot of what we make, and there are closer, cheaper suppliers. (One of America’s biggest exports is aircraft parts. Air Burundi has been out of business since 2009.)
Burundi’s biggest export to the U.S. is coffee — $845,000 in January 2025. The U.S. does produce coffee, but not very much — 11.5 million pounds in 2023, or basically 1/282 of what we consume in a year. In other words, Hawaiian coffee growers are not losing money or market share because of Burundi’s exports to us.
If we’re trying to increase U.S. exports, do we need to enact tariffs on, say, Australia, with which we have a trade surplus?
If we’re trying to bring jobs to the U.S., well, the unemployment rate’s been pretty low, hasn’t it? We had 482,000 job openings in manufacturing in January. As Veronique de Rugy fairly asked, when it comes to manufacturing, isn’t one of our biggest problems a shortage of trained labor?
If the aim is to get other countries to lower their tariffs, shouldn’t we focus on the countries with which we have the highest level of trade and the ones with the highest tariffs?
* The points in Wednesday’s newsletter remain accurate: there’s no easy way to quickly renegotiate existing trade agreements with 50 to 70 countries. The 90-day pause and reset is a de facto admission that the U.S. could not create new trade deals with enough countries fast enough to prevent long-lasting economic damage.
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