Are stiff tariffs a bold stroke? Or a case of second-term overreach?
The trade war hits stock markets — how can you protect your finances?
The global trade war has hit the stock markets — this is how you can protect your finances.
- President Trump has imposed steep tariffs on imports, sparking a global trade war.
- The move has drawn criticism from economists and caused a sharp decline in the stock market.
- Some experts believe the tariffs are a negotiating tactic, while others fear lasting economic consequences.
Donald Trump has always been comfortable taking risks, from his early real estate deals to his late-in-life jump into electoral politics.
Now by imposing tariffs that have started a global trade war, he is taking the biggest gamble of his lifetime.
And maybe of everybody else’s.
Trump is betting that mainstream economists and presidents since World War II have been wrong in generally embracing trade as the best way to build prosperity at home and forge peaceful relations around the world. Instead, he argues that slapping on the steepest tariffs since the 1930s will bring a windfall in federal revenue and force an historic resurgence of manufacturing in the United States.
U.S. customs agents began collecting 10% baseline tariffs on Saturday, with stiffer rounds to begin this week.
“THIS IS AN ECONOMIC REVOLUTION, AND WE WILL WIN,” Trump posted on the social-media site Truth Social. “HANG TOUGH, it won’t be easy, but the end result will be historic. We will, MAKE AMERICA GREAT AGAIN!!!”
That confidence isn’t shared by everyone.
Investors, for instance. After Trump’s announcement, the S&P 500 plunged 10.5%, and the Dow dropped by nearly 4,000 points, the markets’ worst week since early in the coronavirus pandemic in 2020. In two days, the markets lost more than $6 trillion in value, a decline that millions of American could track in real time in their retirement accounts.
“This is the biggest self-inflicted wound we’ve put on our economy in history,” former Treasury Secretary Larry Summers said Sunday on ABC’s “This Week.” “There’s no one, virtually, who doesn’t work for the president who thinks this is a good idea.”
For the first time in the modern era, a president’s policy decision − not the emergence of a deadly virus or a terrorist attack like 9/11 − has shaken the global order, the repercussions not yet clear.
The second-term disease of some presidents: Overreach
The contrasts between President Trump 1.0 and President Trump 2.0 are considerable.
The stiff taxes on U.S. imports are only the latest in a series of decisions he has made since his second inauguration that demonstrate his determination to command far-reaching changes on everything from the size and role of the federal government to the traditional guardrails of the justice system.
On Saturday, tens of thousands gathered on the National Mall in Washington to protest his early weeks in office, the largest of more than 1,000 “Hands Off” marches planned in all 50 states. Signs and chants targeted cuts in education and health care as well as the firing of federal workers and what demonstrators called assaults on democracy.
The president wasn’t around to see them. He was in Florida, competing in the Senior Club Championship being held at the Trump National Golf Club in Jupiter.
Trump no longer feels compelled to pay much attention to the Washington establishment voices that constrained some of his instincts during his first term. This time around, only tried-and-true loyalists have been appointed to the senior White House staff and the Cabinet.
“Donald Trump has been talking about this his whole life,” Commerce Secretary Howard Lutnick said on CBS’ “Face the Nation,” referring to his long-standing faith in tariffs. “It is Donald Trump’s agenda, and we’re all here to help him execute it.”
The president can cite reasons to justify his self-confidence. He has survived two impeachment trials and two assassination attempts, including one that came so close it grazed his ear, a rescue he has credited to God. Courtesy of his appointments to the Justice Department, the federal indictments he had once faced on charges of mishandling sensitive documents and subverting a free and fair election have been dismissed.
Even so, Trump might have caught the classic disease of second-term presidents: Overreach.
Only 18 people in history have been elected twice to the White House, so it’s hardly a surprise that they tend to think highly of their political acumen and public standing. These days, they no longer have to worry about the next time they’ll face voters; the Constitution’s 22nd Amendment bars winning a third term.
After his reelection in 2004, George W. Bush went on a doomed quest to partially privatize the Social Security system. The controversy that followed, along with the war in Iraq, were forces behind a tsunami in the 2006 midterm elections that swept Democrats into control of the House and Senate. A “thumpin’,” Bush called it.
In 2008, the GOP lost the White House, too.
Decades earlier, Franklin Roosevelt was frustrated in his first term by Supreme Court rulings against his New Deal legislation. After he won a second term in a landslide, in 1936, he proposed expanding the high court with up to six more appointments, presumably friendlier ones.
The idea was greeted with bipartisan derision that included his vice president, John Nance Garner. In the next midterm, Democrats lost 72 House seats and eight Senate seats.
For both presidents, their second-term misadventures cost them some of the political currency they had gained in their reelection, no longer available to spend on something else.
Looking for an exit ramp?
Even a handful of congressional Republicans, who have been a compliant bunch since Trump was sworn in, are raising concerns.
With the support of four Republicans, the Senate passed a resolution last week to lift Trump’s tariffs on Canada − a symbolic measure, given that the House is unlikely to pass it nor Trump to sign it, but a small alarm bell ringing for the White House anyway.
Seven Republican senators are now co-sponsoring a bipartisan bill that would limit a president’s power to impose tariffs and give Congress the power to end them.
Voters are increasingly uneasy, too. A Wall Street Journal poll published Friday found Americans by 54%-42% opposed Trump’s tariffs. Three-quarters of those surveyed predicted they would raise the cost of things they buy, which is also the view of most economists.
Jerome Powell, chair of the Federal Reserve, warned Friday that Trump’s tariffs risks fueling inflation and slowing growth. Trump’s first-term vice president, Mike Pence, called them the “largest peacetime tax hike in U.S. history.” Economic forecasters have raised the odds of a recession.
On Sunday, Treasury Secretary Scott Bessent suggested that the tariffs give Trump leverage in negotiations to reduce trade barriers including, presumably, the tariffs he has just imposed.
“He has created maximum leverage for himself, and more than 50 countries have approached the administration about lowering their non-tariff trade barriers, lowering their tariffs, stopping currency manipulation,” Bessent said on NBC’s “Meet the Press.” But he also said the administration was going to “hold the course” on the tariff regime. “Because, you know, after 20, 30, 40, 50 years of bad behavior, you can’t just wipe the slate clean.”
Negotiations could give Trump an exit ramp, if he wanted to take it.
Unlike a Social Security proposal that failed or a court-packing scheme that was ridiculed, however, the imposition of tariffs have already had consequences that will be hard to unwind − not that there are any signs so far from Trump that he wants to unwind them. Tariffs reflect not only his view of the economy but of the U.S. role in the world, of America First.
China has responded with a 34% tariff of its own on U.S. goods, and the European Union vows retribution as well. The sense of the United States as a reliable partner, through thick and thin, has been shaken. Canada’s “old relationship” with the United States is now “over,” Prime Minister Mark Carney declared in a national television address.
What comes next?