Such a series of reactions and reprisals from China and the US appeared to be exactly what investors feared last week, as American stock indexes dropped by double-digit percentages.
By Monday a growing chorus of business leaders were speaking out against Trump’s tariff plan, including Wall Street financiers who had been strong public supporters of his administration – trying, it appeared, to get the president to back down by force of will alone.
Meanwhile, US markets were poised to jump at any reason for hope. When a social media post on Monday morning indicated that the president was contemplating a 90-day delay on new tariffs – perhaps drawn from a misinterpretation of comments made by Trump economic adviser Kevin Hassett on Fox News – US stock indexes soared. The S&P 500 index added $2.4tn in market value for about 10 minutes, only for it to all vanish once the White House quickly denied the president was contemplating such a move.
Trump further closed the door on Monday afternoon, saying he was not “looking at” any kind of delay. It was still full speed ahead on tariffs.
“We’re going to have one shot at this,” he said.
Perhaps the most concerning message for investors and foreign leaders hoping for a last-minute reprieve – and an exit ramp to stability – came from one of Trump’s top trade advisers, Peter Navarro.
“This is not a negotiation,” he wrote in a Financial Times opinion piece published on Monday afternoon. “President Trump is always willing to listen. But to those world leaders who, after decades of cheating, are suddenly offering to lower tariffs – know this: that’s just the beginning.”
So if this is about the start of broader systemic change – what is the desired end goal worth potentially tanking the global economy?
One theory is that Trump has a plan with several of his top advisers – the “Mar-a-Lago accord”, it is called – with the ultimate goal of compelling America’s trading partners to weaken the US dollar on the international currency exchange. Such a move would make American exports more affordable to foreign markets and diminish the value of China’s large reserves of US currency.
It’s a plan pushed by Trump economic adviser Stephen Miran, although he has denied that it is current administration policy.
That’s just one of the possible explanations for the current stock market mayhem that Trump has purposefully instigated – one that many other prominent economists warn is risky. It is far from the only one.
Ever since Trump shocked the world with his sweeping tariff plan, White House officials have fanned out across media to preach patience and offer a selection of sometimes contradictory explanations as to the strategy behind Trump’s global trade war. He is doing it to raise revenue and protect American industry – or as a negotiating tool. The tariffs are permanent – or they are temporary. They will prompt individual deals with other nations – or compel some grand multilateral agreement.
As Trump presses on to Wednesday’s tariff cliff with no signs of backing away, he seems willing to keep the world guessing.
