As he proposes ever stiffer tariffs, President Trump has normalized his merely big ones.According to The New York Times, President Trump’s proposal for increasingly high tariffs has become the new norm, with a 10 percent tariff now being seen as a minor increase. This is a stark contrast to a few years ago when such a significant tariff hike would have been unthinkable. However, compared to the much larger tariffs that Mr. Trump has already imposed or threatened, a 10 percent tariff no longer seems like a big deal.
The announcement of these tariffs on April 2, which ranged from 10 percent to 60 percent on many of America’s trading partners, caused chaos in the bond markets and led to a decline in the U.S. dollar as investors feared the consequences of a trade war. In addition, Mr. Trump also increased tariffs on China to a minimum of 145 percent, resulting in a halt in trade between the two countries.
However, this turmoil seems to have calmed Mr. Trump’s actions to some extent. He quickly paused tariffs on most countries and gave them 90 days to negotiate trade deals instead. He also granted exemptions from China tariffs for electronics manufacturers and offered some relief for automakers. Furthermore, he has hinted at the possibility of doing more, stating that he likes to remain “flexible.”
Investors have responded positively to any signs of progress, even if they are minor. Stock markets have almost fully recovered from the losses they suffered after April 2, with comments from Trump administration officials about working towards trade deals with allies and planning to meet with Chinese counterparts to discuss their trade dispute.
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