President Trump has reset his approach on tariffs following a tumultuous six weeks that put his second term at risk.
The announcement on Monday that the U.S. and China have agreed to suspend heavy tariffs marks a significant milestone in Trump’s strategy regarding tariffs.
This agreement with China came after a simpler deal with the UK the previous week. These countries are the first to reach any concrete agreements since Trump’s “liberation day” tariff on April 2.
As a result, many of Trump’s ambitious tariff plans have been dropped. There’s little expectation that high tariffs will persist long enough to seriously boost American manufacturing.
Instead, it seems that short-term strategies aimed at improving trade relationships with individual countries are becoming the focus without altering the global trade system.
Intensive negotiations between U.S. and Chinese representatives have resulted in a dramatic reduction of tariffs, with U.S. tariffs on Chinese goods dropping from 145% to 30%, and China’s tariffs on U.S. imports expected to decrease from 125% to 10%.
Treasury Secretary Scott Bescent remarked that the highest tariffs, which were effectively an embargo, are undesirable for both sides, emphasizing the desire for more trade.
Bescent has been a proponent of milder trade policies, making the agreement a win for him, while serving as a setback for those who sought a more aggressive approach, including Trump’s longtime ally Peter Navarro.
The news of the tariff suspension has led to a significant surge in the stock market, with the Dow Jones industrial average rising over 1,000 points—an increase close to 3%. The broader S&P 500 also gained about 3.25%, while the tech-heavy NASDAQ composite rose around 4.3%.
American tech companies were especially pleased with the news. For instance, Apple shares climbed by 6.3%, and Nvidia’s shares increased by 5.4%.
All major stock indices have recovered from the sharp declines that followed the April announcement.
Democrats have criticized the perception that Trump has succeeded in his negotiations.
Minority Leader Chuck Schumer (D-N.Y.) expressed his concerns on social media, while Senator Elizabeth Warren (D-Mass.) similarly claimed that Trump’s “turmoil is harming the economy, risking American savings, and driving up prices.”
Essentially, Trump appears to have conceded to political and economic pressures in reaching his deal with China.
His approval ratings had dropped sharply just weeks after the “liberation day.” A late April poll showed he was 12 points underwater in terms of job approval, with 56% of Americans disapproving of his performance compared to just 44% approving.
Similar results appeared in other major polls. For instance, a Reuters/Ipsos poll showed an 11-point net negative rating, while a CBS News/YouGov poll recorded him at 10 points underwater.
The general public perception of Trump’s economic performance has been notably poor. He even posted about a Fox News poll indicating 58% of registered voters disapproved of his handling of the economy.
Although these political threats may diminish as tariffs and the stock market stabilize, there remain significant risks ahead.
For one, there’s the potential for tariffs between the U.S. and China to rise again, even after the current suspension.
Moreover, the unpredictability surrounding tariffs can dampen consumer confidence and stifle business investment, increasing the odds of a recession.
Additionally, news from China raises concerns about soaring shipping costs as imports increase.
It’s also interesting to note that Trump’s maneuvers with China coincided with his populist efforts. On Monday, he announced steps to lower prescription drug prices.
His executive order urged pharmaceutical companies to offer prices for American patients that are comparable to those in other developed countries.
How effective this order will be remains uncertain, but politically, it’s beneficial to be seen as acting in the interests of American consumers, a stance typically associated with figures like Senator Bernie Sanders (I-Vt.) rather than Trump’s party peers.
However, Trump has also found himself embroiled in a new controversy this week regarding reports of Qatar’s plan to donate a luxury Boeing jet, valued at around $400 million.
This jet is intended to become part of the new Air Force fleet and is expected to benefit Trump’s Presidential Library Foundation once he leaves office. Such a generous donation has drawn criticism, even from some within his own party, with Democrats calling it a form of blatant corruption.
Yet, even if new storms arise, it seems Trump has managed to find a respite from the tariff controversy he initially created.
