The U.S. President confirmed on Thursday his intentions to reactivate interchange tariffs that had been put on hold for 90 days, in case nations fail to consent to agreeable trade agreements. This admonition comes as his administration speeds up dialogues with foreign countries subsequent to his decision which put a hold on expansive interchange tariffs on Wednesday. However, he maintained a standard 10% tariff rate on all imported goods.
Trump hinted, during a White House Cabinet gathering, that a return to the original state could be a possibility if the desired, or essential deal fails to materialise or if the agreement does not benefit both parties. Another standout point in Trump’s decision has been the treatment of China, left out from the cessation, and burdened instead with a heightened 125% interchange tariff. With the previous tariffs still active, China now faces a total tariff rate of 145%.
Trump also suggested that the foundational 10% tariff could be negotiated down for specific countries, depending on their trade policies. Alluding to the trade balances with various nations, Trump pointed out that some have large trade deficits with the US, or vice versa, while the scenario is different with others. Each country, he emphasized, demanded individualized consideration due to their unique trade scenarios.
This shifting stance regarding the implementation of tariffs on imports has been a characteristic of Trump’s approach, leaving global markets in flux. Market turmoil was cited as a cause for the temporary freeze on interchange tariffs, as investors showed signs of unease and fear. In addition, Trump implied that there may be an extension to the 90-day pause, but it remained to be seen how events will unfold.
Trump’s chief economic advisors have embarked on discussions relating to tariffs and trade policies with approximately 75 nations. Insiders from the White House have indicated promising developments in talks with countries like Japan, South Korea, and Vietnam, though official agreements are yet to be signed. Commerce Secretary Howard Lutnick described the response from these countries as ‘astonishing’ when addressing Trump during the Cabinet meeting.
Secretary Lutnick also noted that the consequential proposals certain countries have come forward with are far beyond what one could have imagined. He posits that these developments were only possible due to the assertive steps taken by the President. Trump’s argument has consistently been that such stringent tariffs are indispensable in order to reduce trade deficits with countries, principally China, and breathe life into the US manufacturing sector.
Even with the pause on interchange tariffs, the administration under Trump continues to levy considerable import taxes, triggering concerns among economists that this could inflate consumer prices and potentially spur an economic downturn. According to Moody’s Analytics’ chief economist Mark Zandi, the chances of a recession hover around 60% in the aftermath of Trump’s tariff policy moves.
The easing on interchange tariffs has effectively paved the way for an imminent standoff with China, one of the US’s top trading partners. Trump’s heightened tariffs on Chinese imports was in response to Beijing’s hefty 84% retaliatory tariffs on the US. Trump stated that the US is hopeful about striking a deal with China, albeit acknowledging China’s long-standing exploitation of the US.
However, when questioned about whether Chinese President Xi Jinping had initiated talks on trade policy, Trump opted not to divulge any information. He expressed optimism about a resolution, but admitted the difficulty in overcoming the damage China had inflicted on the US’s economy. He attributes the devastation of the US’s economic bases largely to China’s actions over time.
Made specific by Trump’s tariff plans are the ongoing 25% tariffs on imports from specific industries, including steel, aluminum, and auto. Other areas where Trump has pledged to impose a significant tariff include pharmaceuticals. Additionally, existing 25% tariffs on certain goods from Mexico and Canada continue to be enforced.
The stock market experienced a downturn on Thursday, making a stark contrast to the scenario a day prior, when stocks skyrocketed on the heels of Trump’s announcement of the tariff suspension. This sudden dip came just hours after Trump called on American citizens to stay calm despite market instability. Playing down the fall in the market, Treasury Secretary Scott Bessent commented that a two-step up, one-step down progression wasn’t necessarily a negative scenario.
Bessent also expressed confidence that the ongoing negotiations with various countries will bring about significant clarity on tariffs within the next three months. This optimism came despite Trump admitting his lack of attention towards the stock market on Thursday, due to a busy Cabinet meeting – a stark contrast to his reactions on the previous day when the market rallies were his pride.
Regarding the heavy-duty tariff regime, Trump acknowledged that transition-related costs and issues exist. However, he defended his strategies asserting that the final outcome would bring about significant benefits. ‘In the end, it’s going to be a beautiful thing,’ Trump concluded.