What will Trump do when his tariffs backfire?

What will Trump do when his tariffs backfire?
Nils Pratley

The US president’s tariffs are almost certain to have dire consequences and he is not impervious to market decline or public opinion


(Guardian UK) So much for the idea that “liberation day” would free financial markets from their fear of the unknown. Publication of precise tariff rates, went a cheerful line of advance thinking, would at least allow investors to assess the probable trade effects on the basis of hard information. True optimists clung to the idea that Donald Trump would not wish to risk a truly severe market reaction.

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The S&P 500 index fell 4% in early trading and is down more than 10% from its high six weeks ago. The dollar fell sharply even though traditional logic says tariffs ought to be currency-positive if $600bn (£457.5bn) of extra revenue is on cards. On this occasion, the market simply adjusted to the higher likelihood of a US recession from higher prices and slower growth.

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On that score, analysts noted the simplistic – or plain perverse – formula behind the administration’s tariff arithmetic. It seems to have taken a country’s trade deficit in goods with US, divided it by its exports to the US and called the resulting number a trade barrier that deserves a “reciprocal” US tariff. The underlying logic, it would appear, is that every country should always have a perfect trade balance with the US – never mind the impossibility of achieving that outcome, and never mind that the tariffs don’t affect trade in services.

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The view from bond specialist Pimco is that we should be wary. “He is certainly not entirely impervious to a market decline, nor is he unaffected by public sentiment, significant congressional pushback or concerns about a recession,” says Libby Cantrill, its head of US public policy.

“So, there is likely a limit to how much pain he and his administration are willing to endure in order to rebalance the economy, but when that is or what that looks like remains to be seen. For now, we should assume that his pain tolerance is pretty high and that tariffs stick around for a while.” ..................(more)

https://www.theguardian.com/us-news/2025/apr/03/the-world-looks-on-and-wonders-how-much-pain-is-trump-willing-to-take