Earlier this week marked the end of the initial phase of President Trump’s tariffs and trade conflict. The United States announced noteworthy reductions in taxation with China.
Both Washington and Beijing agreed to lower their tariffs by 115 percentage points from what they had set at the height of this brief trade war. Going forward, US tariffs will sit at 30%, while China’s will be at 10%.
However, there’s a possibility that tariffs might increase again after a 90-day pause is formally established between the two nations.
This so-called tariff war, which kicked off with Trump’s “Liberation Day” proclamation on April 2, seems to have come to a close following his surprising tax announcements on multiple countries.
There are clear winners and losers in this situation.
winner
Treasury Secretary Scott Bescent
Bescent emerged as a prominent advocate for a more moderate approach to tariffs, successfully making his case.
In reference to the deal with China, he argued that the tariffs felt akin to an embargo, something neither side desired. “We want trade,” he emphasized.
Last month, Bescent had predicted a cooling off between the US and China.
He represented a counterbalance to Trump’s steadfast ally, Peter Navarro, who champions high, long-term tariffs aiming to revitalize American manufacturing.
Bescent won this internal debate without appearing as a naysayer or someone out to undermine Trump, which is crucial for a president who remains wary of disloyalty.
Stock market
The stock market experienced a sharp decline after Trump’s “Liberation Day.”
However, it rebounded quickly once the threat of tariffs was eased.
All three major indices regained ground, approaching pre-April 2 levels.
While the S&P 500 is, albeit slightly, in positive territory for 2025, both the Dow Jones and the tech-heavy Nasdaq are similarly situated as before, with the panic following Trump’s announcement fading away.
In fact, the Nasdaq had a particularly impressive day on Tuesday, seeing an increase of around 1.6%.
UK
The trade agreements, albeit limited and mainly focused on auto, steel, and aluminum sectors, proved to be beneficial for the UK.
Most experts had suggested Japan or South Korea might be the first to strike a deal with Trump post-April 2, but the UK jumped in first.
This agreement reportedly followed a call from Trump to Prime Minister Kiel Starmer, who was watching his beloved Arsenal on TV at that moment. It underscores the notion of a “special relationship” across the Atlantic.
The deal also lifted the government’s profile after the Labour party faced setbacks in local elections recently.
Federal Reserve Chairman Jerome Powell
Powell secured a win by essentially doing less. He chose not to engage with Trump’s strong push for additional interest rate cuts.
Trump had hinted at possibly removing Powell at one point, though the independence of the Fed seemed solid. Eventually, the markets shifted focus away from that threat as Trump backed off.
The calmness Powell showed regarding rate reductions seems to align with recent data.
As an important inflation measure, the consumer price index rose just 0.2% in April, a more tempered increase than many had anticipated.
mixture
Trump
Trump stands to gain from the tariff relief offered to China and the stock market’s recovery.
However, it’s worth noting that the issues were largely self-inflicted in the first place.
The wild swings in stock markets and the global unrest stemming from Trump’s earlier actions undeniably added to the sense of unpredictability surrounding him.
I’m not convinced that the promised manufacturing resurgence from Trump is genuinely materializing, though.
That being said, his retreat may significantly mitigate the impact on him and his party going forward. Almost 18 months remain before mid-2026.
China
On the flip side, the tariff disruption couldn’t have happened without some discomfort for Beijing.
China’s economy is still open to recent diversification efforts by its leadership, affected significantly by trade tensions with the US.
However, the conflict has afforded Beijing some relief.
China confronted Trump, and ultimately he had to pursue peace.
The stern rhetoric from the president didn’t translate into actions that could genuinely threaten China. This episode also showcased vulnerabilities on America’s part.
For instance, China could easily note that Trump had previously stepped back from implementing many tariffs on other countries because of concerning signs from the bond market.
loser
Canada
Our northern neighbor still faces significant uncertainties regarding various tariffs affecting cross-border trade.
Canada stands particularly vulnerable since the United States is its most important trading partner.
Despite Trump imposing tariffs on items like steel, aluminum, and lumber, Canada has fought back vigorously.
Interestingly, Trump seems to inadvertently be aiding the Canadian Liberal Party’s current position. Voters favored incumbents who had previously faced significant challenges from conservatives, perhaps seen as effective opponents to Trump’s leadership.
Yet, Canada is still grappling with tough issues ahead.
Peter Navarro
Navarro has always been somewhat of an outlier among more conventional economists.
However, it appeared that his moment was approaching around April 2, which now seems far from the truth as Trump distances himself from Navarro’s views. The adverse effects on financial markets were unmistakable.
