With the deadline for the Trump administration’s temporary tariff pause looming, traders are understandably on edge. They’re acutely attuned to the economic fallout that would inevitably follow. Donald Trump’s short-lived administration rattled the markets with his own strings of tariffs, unprecedented in their scope. These were a 10% universal tariff, 50% tariffs on steel and aluminum, and 25% tariffs on autos and auto parts. Economists on both sides of the aisle have cautioned that such measures would re-light the spark of inflation and throw the economy into a recession.
Yet the impact of these tariffs has, unsurprisingly, been huge. Tariffs on China eventually exceeded 145% for certain products, thus erecting an impenetrable trade wall against America’s second largest trading partner. Click to enlarge In addition, tariffs for dozens of other countries increased, with some jumping as high as 50%. And investors share their concern over rising consumer prices from this aggressive new approach to trade. They’re even more worried that it will result in a deceleration in economic growth in the months ahead.
On April 9, the Trump administration announced a 90-day pause on its own “reciprocal” tariffs. This suspension of operations was intended to provide a safe space in which to negotiate. Most notably, it forced us to assess the impact of current tariffs across sectors. This short-term relief will sunset on July 9, leaving the fate of U.S. trade policy up in the air. Without new trade deals coming into effect before this date, tariffs might have a chance to rise again.
President Trump has already negotiated a trade framework with the United Kingdom (U.K.) and China. If continued, this move would signal a major turn away from the culture of his administration. China last month indicated that it wants to reestablish the rare earth market with the United States. That announcement came within hours of White House officials announcing that the two countries had agreed to terms on a framework.
Though these innovations provide a great deal of hope, that promise is further complicated by international instabilities that persist. The brittle ceasefire reached between Israel and Iran on Monday underscores the shifting and often dangerous currents of war and peace in the Middle East. This mounting tension would be the catalyst for monumental shifts in U.S. tariffs and trade policies.
The current tariffs endanger making food more expensive for American consumers in the coming months. Inflationary pressures are starting to appear, and high, sustained tariffs will not contribute to a growing economy, some economists warn. Domestic trade policies and international relations overlap in significant ways. Traders will need to get used to a new, complicated economic environment driven by these changing forces.