‘Trump is an agent of chaos,’ expert says. ‘I wouldn’t want to rule anything out’
Businesses and financial markets are still facing “a massive amount of uncertainty” after Donald Trump‘s spectacular pause in his tariff assault on trading partners, economists have told The i Paper.
Stock markets soared again as fears of a trade war were temporarily quelled, but experts said there would be “no return to normal” any time soon.
The US President said on Wednesday that a “baseline” 10 per cent tariff would fall into place for most countries, but ratcheted up the levy on Chinese imports to 145 per cent, prompting Beijing to retaliate on Friday with 125 per cent tariffs.
But unanswered questions remain as to how Trump’s global economic chaos and escalation of a trade war between the world’s biggest economies will end as financial markets continue to trade with little stability.
“I wouldn’t want to rule anything out,” Thomas Sampson, associate professor of economics at the London School of Economics, told The i Paper.
“We don’t know whether this is just a pause and in 90 days these tariffs will be introduced again, or whether it means that the tariffs above the 10 per cent level will never be coming back,” he explained.
“Trump is a kind of agent of chaos,” Denzil Davidson, a trade expert and director at Global Counsel, said. “He likes drama and he can’t be trusted. So whatever happens, everyone’s perceptions of the US have already changed.”
Trump’s tariff assault ends and the market wins
One “definitely possible” outcome is that the US tariff assault does not return after the 90-day pause, Sampson said. This may involve a permanent continuation of the 10 per cent baseline levy for all imports into the US, or a different reduced rate not at the same height as previously announced.
He suggested the pause was a “signal” that the White House was “to some extent spooked by the stock price declines, and the kind of volatility in the financial markets”.
Trillions of dollars have been wiped from stock markets since Trump’s announcement last week while US government bond yields surged.
Jamie Dimon, the JPMorgan Chase chief executive, said on Wednesday that a recession was a probable outcome of the tariffs. Goldman Sachs, meanwhile, increased the possibility of a recession in the next year to 45 per cent – up from 35 per cent predicted at the end of March.
Trump indicated that the panic in markets had factored into his thinking. “You have to be flexible,” he told reporters.
Even if 10 per cent “baseline” tariffs continue beyond 90 days, Sampson said trading “won’t return to normal” because there remains “a big hike in tariff levels that is going to lead to a reduction in trade with the US”.
Davidson, however, said it would be a “pretty unlikely scenario” for Trump to drop his tariff agenda, and “something quite big would have to change to get there”.
“No one is going to be sitting back and relaxing and saying, ‘Everything’s fine now’,” he explained. “Unless things change to a different pattern of behaviour over some time, there will continue to be a deep lack of trust.”
Hefty tariffs are reinstated
“What happens at the end of these 90 days is highly unpredictable,” Davidson said, including whether Trump’s tariff agenda is reinstated in some form after the 90-day pause.
“All the tariffs being gone seems like the less likely outcome,” he continued. “But the big new fact we learned was that Trump does actually pay attention to the financial markets and the economy, and he doesn’t want them to crash.
“What the administration’s appetite for risk might be after 90 days, who the hell knows? They don’t even know yet.”
Sampson said a resumption of Trump’s tariff plan was likely to result in “further falls in financial markets” in a “repeat of what we have just seen”.
“Then the imposition of the tariffs itself would increase prices for US consumers, which would lead to a slowdown in growth in other countries,” he said. “There’s a clear economic cost to these tariffs if they are imposed.”
Davidson added that it was probable that countries would “continue to retaliate” if the tariffs resumed.
The EU suspended its 25 per cent tariffs on US goods – brought in following Trump’s 25 per cent tariff on steel, aluminium and cars entering the US – for 90 days following Trump’s announcement, a levy Davidson expected to be reinstated if US tariffs returned.
Trump uses freeze to negotiate trade deals
Key officials in Trump’s administration suggested that the dramatic pause in the tariff rollout was part of a great master plan. The White House press secretary, Karoline Leavitt, told reporters: “Many of you in the media clearly missed the art of the deal,” referring to Trump’s book.
The Treasury Secretary, Scott Bessent, said the 90-day freeze on “reciprocal tariffs” was planned all along to bring countries to the negotiating table, and the White House would use the 90-day period to reach trade deals.
India moved quickly on Thursday in the hope of securing a trade deal with the US, according to reports, after agreeing in February to work towards two-way trade worth $500bn (£382bn) by 2030.
Trump even said he was open to talks with China despite slapping Beijing with the weighty 145 per cent levy – which the White House clarified after initially suggesting it would be a 125 per cent tariff.
“Trump seems to like the idea of a deal, but doesn’t have a very clear idea of what he actually wants to be in the deal,” Sampson explained. “So it’s not obvious what countries would be negotiating over” and “whether any deal would actually introduce changes that kind of matter for the US”.
Vietnam, Sampson explained, was facing one of the highest tariff rates and had signalled to the US that it would be willing to make concessions to lower the levy.
“What is it Vietnam can really offer the US that matters for an economy the size of the US?” he continued, explaining that negotiations with smaller countries made little sense. “The US economy is so big relative to Vietnam, and Vietnam is not really a strategic player in world affairs.”
Davidson insisted that he thought it probable that countries would “explore whether so-called deals are possible”, but also suggested Trump’s primary intent may be to increase onshore production and limit foreign trade.
He also dismissed suggestions that the US would seek to negotiate with each of its trading partners all at once within the time frame. “You can’t do that,” Davidson said. “No one has capacity to do that, so we’ll see who he prioritises.”
Sampson suggested that countries would also face the question of whether they can “trust Trump to honour the deal” that they make with him after the chaos of his tariffs and his past reneging on deals like the US-Mexico-Canada trade agreement.
“Another thing countries have to take in to account is, if you do a deal with the US, how long does that deal actually last? And clearly that’s going to make them more reluctant to do deals.”
EU-US ‘zero for zero’ trade deal
One of the deals proposed was from the European Commission president, Ursula von der Leyen, for a “zero for zero tariff agreement between the European Union and the United States”.
Such a deal is likely to only cover cars and industrial goods, which account for around 40 per cent of the EU’s trade with the US.
Trump has largely dismissed the idea and insisted on Monday that the EU would have to commit to buying $350bn (£267bn) of American energy to get a reprieve from the tariffs.
Elon Musk, Trump’s influential adviser, has been keen on the idea, however, calling for “a zero-tariff situation, effectively creating a free-trade zone” between the UK and EU.
Sampson said: “If the US and the EU did a kind of zero-tariff deal on either a significant chunk or potentially all of their trade, that would be significant and would be a boost to both economies.”
Sampson said the White House was motivated by “decoupling from China”, and such a deal with the EU would aid this agenda. “I think so far the trade policy hasn’t achieved that, because, if anything, it’s isolated the US rather than China.”
“But I don’t think it would necessarily lead the EU to pivot away from trade with China.”
He expressed scepticism over the reality of the deal because there was little indication the Trump administration was interested in such an agreement.
Davidson said such a deal “would be extraordinary” but doubted “it was put forward in the expectation that it would be accepted”.
He said the EU was posturing “to say, ‘Look, we’re here to negotiate, and here’s a bold offer that deals with all your justifiable complaints you might have’.
“It was done to kind of score a point with the US and for the EU Commission to demonstrate to members that they were willing to negotiate.”
“It might lead somewhere,” Davidson said. “But you know we’re still in the early days of this administration, and with President Trump, who knows?”
