President Trump’s tariff war is being described as America’s Suez crisis — the moment when long-held global perceptions of a reliable superpower and its mighty currency were shattered in a single week.
The claim comes after the aggressive protectionism that Trump envisaged making the United States more prosperous and self-reliant instead highlighted the vulnerabilities of its economy, forced a retreat from higher-level tariffs and increased borrowing costs.
Trump’s policies were defended by his team, which insisted it could make “90 deals in 90 days” to satisfy all the countries clamouring for a reduction in the tariff rates announced on April 2. His advisers maintain it was his strategy all along to use tariffs to drive countries to reform their trading practices, which he blames for “ripping off” America.
But at the end of the most consequential week of Trump’s second presidency, the US is embroiled in a high-stakes trade battle with China and has the greatest average level of tariffs for almost a century despite the three-month pause on the higher rates to allow for negotiations.
The Suez Crisis in 1956 was seen as symbolic of Britain’s fading power
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“We are doing really well on our TARIFF POLICY. Very exciting for America, and the World!!! It is moving along quickly,” Trump posted on his Truth Social platform. He suggested on Thursday that he would hire hundreds of lawyers to draw up agreements before his new deadline to avoid higher tariffs on July 9. However, there was another day of bumpy stock market trading, with US Treasury bonds falling as their yields rose to give the same signal of failing confidence in the US economy that led to Trump’s pause on Wednesday.
Larry Summers, former US Treasury secretary under President Clinton, told The Washington Post: “I suspect the administration stepped back because it saw a Suez moment approaching with general lack of confidence in US financial assets spreading to the dollar.”
His comparison recalled the ill-fated invasion of Egypt in 1956 to seize the Suez canal, regarded as symbolic of the fading power of Britain and its currency after President Eisenhower used a threat to sell US holdings of sterling bonds to force a humbling withdrawal.
Britain lost the primacy of the pound as a reserve currency and while the dollar remains the reserve currency of choice, it accounted for more than 70 per cent of reserves in 2000 but less than 60 per cent last year. This exodus appears to be accelerating under Trump, with other currencies, from the Swiss franc to the yen and euro, rising strongly this year. Gold is also priced at record highs, suggesting that investors are diversifying away from the dollar.
Trump backed down from his higher-level tariffs after US Treasury bonds began to be dumped by global investors, believed to include Japan, which has a delegation in Washington to negotiate a reduction on the 24 per cent tariff that was imposed.
Peter Navarro, the White House senior counsellor for trade, told Fox Business: “We started working on these deals months ago. So we’re going to run 90 deals in 90 days. It’s possible.”
Peter Navarro, the White House senior counsellor for trade
EVELYN HOCKSTEIN/REUTERS
Navarro is the author of Death by China, a book that sets out how Beijing’s policies make fair trade “virtually impossible” through “illegal export subsidies and currency manipulation”.
He shares Trump’s desire to reset trade relations with China, which has been hit with 125 per cent in tariffs in the trade war, and a further 20 per cent for supplying illicit fentanyl to the US.
• Why China is not afraid of a trade war with Trump
Navarro said: “From our perspective, China has killed over a million Americans with deadly fentanyl and related drugs, and it simply refuses to do anything about that. At the same time … China has destroyed over 60,000 American factories and stolen over five million manufacturing jobs.”
Trump’s escalation of tariffs on China has strangled trade between the economies
NATHAN HOWARD/REUTERS
Trump’s escalation of tariffs on China, matched by 125 per cent from Beijing, has in effect strangled trade between the two largest world economies. A calculation by The Washington Post put the average US import tariff at 27 per cent, taking into account China’s 13 per cent share of imports at the time it was imposed. This compares with an average global rate on “liberation day”, when Trump announced a 10 per cent baseline and higher rates for more than 80 nations, of 26.8 per cent.
Trump may yet take the tariff average higher, he suggested in a post on Truth Social threatening Mexico, which is already being charged 25 per cent. He accused the country of failing to honour a 1944 water-sharing treaty. He said: “We will keep escalating consequences, including TARIFFS and, maybe even SANCTIONS, until Mexico honours the Treaty, and GIVES TEXAS THE WATER THEY ARE OWED!”
Larry Fink, head of the investment firm BlackRock, said the US was “very close, if not in a recession now” as a result of the unpredictability created by Trump. Fink told CNBC: “The United States, post-World War Two, was a global stabiliser. We are 1744402020 a global destabiliser. This is not a pandemic, this is not a financial crisis. This is something that we’ve created.”
