Did Donald Duck?

The President has paused most of his "Liberation Day" tariffs. Is he having second thoughts, or was that his plan all along?

It’s no exaggeration to describe Donald Trump’s first three months back in the White House as a roller coaster ride. Wild, historic swings and ups and downs have whipsawed the stock markets. Tariffs are on, then off, then on again (and higher), and then some are back off and some are back on.

Trump often uses the phrase “nothing like it” to highlight, many would say exaggerate, his achievements or in announcing his policies. And so far, not even 100 days into his reign, there’s been “nothing like it.” According to the Pew Research Center, most Americans are so “concerned about what the administration is doing” they’re following the news more closely than ever before.

It should come as no surprise that he’s embroiled the US in a trade war. He all but promised one during his Presidential campaign. “To me, the most beautiful word in the dictionary is tariff, and it’s my favorite word,” the then candidate for President told Bloomberg News Editor-in-Chief John Micklethwait during an interview back in October 2024. But captains of industry, hedge and pension fund managers, and ordinary Americans—who have watched in horror their withering 401k’s—have some other words to describe their feelings about tariffs. Words you won’t find in Webster's dictionary.

Trump had billed April 2, the day he planned to raise tariffs on the rest of the world—friends and enemies alike—as “Liberation Day.” It instead wound up liberating American investors and retirement funds from about $5 trillion of what had been a year and a half of steady stock market gains. During the campaign, Trump had promised an economic “boom like no other.” The boom, unfortunately for investors, was the sickening sound of a crashing market.

“The volatility began last week after Trump shocked investors, economists, business leaders and trade partners with a barrage of tariffs that were far steeper than anyone expected,” wrote Ryan Dzember and Sam Goldfarb in the Wall Street Journal. “A four-day selloff ensued, but it was Wednesday when the wild ride peaked.”

That left even some of Trump’s most ardent supporters and billionaire buddies complaining.

“Other nations have taken advantage of the U.S. by protecting their home industries at the expense of millions of our jobs and economic growth in our country,” wrote billionaire and Trump supporter Bill Ackman on X, “but by placing massive and disproportionate tariffs on our friends and our enemies alike and thereby launching a global economic war against the whole world at once, we are in the process of destroying confidence in our country as a trading partner, as a place to do business, and as a market to invest capital.”

“When markets crash,” Ackman added, “new investment stops, consumers stop spending money, and businesses have no choice but to curtail investment and fire workers.” Even Elon Musk, Trump’s new BFF (Billionaire Friend Forever), has said tariffs are “bad policy” and called Peter Navarro, Trump’s trade advisor and University of California professor, a “moron,” “dumber than a sack of bricks,” and “Peter Retardo.”

Tariffs are taxes

Tariffs are taxes (or" “duties” in the Constitution’s parlance) paid by the importer—not the exporter—when foreign goods enter the United States. They are added to the price of goods when they enter the US. They are not paid by the exporter nation but instead by the importer—much like a sales tax.

Since the Constitution grants the authority to levy taxes and customs duties to the Congress—not the President—you might be asking, “how does Trump get to impose all these new tariffs (aka taxes) without the approval of Congress?” Is this yet another Constitutional crisis? Possibly.

Through the years Congress has, by passing legislation, abdicated much of its authority to impose tariffs to the President by allowing the President to raise (or lower) tariffs during a national emergency or to protect national security. Who gets to declare a national emergency or decide when tariffs are needed to protect national security? Not Congress, but the President! And in his usual “give me an inch I’ll take 100 miles” style, that’s exactly what Trump has done.

“President Donald J. Trump declared that foreign trade and economic practices have created a national emergency,” proclaimed a White House statement on April 2, Trump’s so-called Liberation Day, "and his order imposes responsive tariffs to strengthen the international economic position of the United States and protect American workers.”

But it’s not only billionaires, like Musk and Ackman, who are complaining about Trump’s tariffs. Democrats and more than a few Republican members of Congress are as well—even those well-known for their MAGA leanings.

“Seven Senate Republicans and a dozen House Republicans,” reported The Washington Post, “had signaled that they would try to wrest tariff power from the president,” including Sens. Thom Tillis (NC), Rand Paul (KY) and “MAGA” Ron Johnson (WI). Tillis wondered “Whose throat do I get to choke if this proves to be wrong?” Paul criticized Trump’s tariffs as based on a “fallacy.”

The China Syndrome

Why would Trump risk the ire of his billionaire buddies and the support of MAGA Republicans in the Senate and House? For a clue, you can begin by looking at the following graphic.

Since the 1980’s the trade balance, the difference between the goods that American companies sell abroad (exports) and the goods that Americans buy from other countries (imports) has been steadily growing. It has, instead, become a trade imbalance. Americans buy more than $1.2 trillion of foreign goods than other countries buy of American-made goods.

In explaining why Trump was declaring a national emergency the White House cited the “large and persistent annual U.S. goods trade deficits,” which have led to the “hollowing of our manufacturing base” and “rendered our defense-industrial base dependent on foreign adversaries.”

The trade deficit, according to the White House statement, “is driven by the absence of reciprocity in our trade relationships and other harmful policies like currency manipulation and exorbitant value-added taxes (VAT) perpetuated by other countries.”

Trump is not wrong to want to recalibrate some of the United States’ trade relationships. Some of our closest trading partners tariff US goods or use non-tariff trade barriers that make it more difficult for US companies to compete abroad. But while Trump likes to blame tariffs for the trade imbalance, some US companies have also been keen to seek cheaper labor elsewhere, or as Apple’s CEO Tim Cook has explained, companies (like Apple) have moved some, or all, of their manufacturing to countries with more specially-skilled labor, like China.

Speaking of China, Trump is obsessed with China. And he’s not wrong. Take a look at the following graphic. It shows the six nations with the largest US trade surpluses and the six with the largest US trade deficits. Deficits are much larger than surpluses—but one stands out. About one-fourth of the US’s total trade deficit of $1.2 trillion results from trade with only one country—China. Trump is right to be angry with China, whose trade policies, especially non-tariff barriers, discourage American imports.

According to a study by the Stanford Center on China’s Economy and Institutions, “Non-tariff barriers, like administrative hurdles, inspections, or quotas, were responsible for 50% of the overall reduction in China’s imports from the U.S. during the height of the U.S.-China trade war in 2018 and 2019.” The study’s authors went on to conclude that “non-tariff barriers were a primary instrument used by China in the U.S.-China trade war, with implications for China’s trade conflicts with other countries.”

Paul Krugman, the Nobel-winning economist and former NY Times columnist has said that while Trump’s tariffs are “bad economics” and “bad politics,” “we have real grievances against China.” But tariffs, argues Krugman, are a “bad way to address those grievances, not the least because he’s alienating everyone who should be on our side.”

Many conservative economists are also concerned about Trump’s tariff frenzy. "It's painful to see a ruinous decision from back in the 1920s being repeated. Now insofar as he's using these tariffs to get various strategic things settled and that he's satisfied with that," former Standford professor Thomas Sowell said during a podcast interview last Wednesday, "but if you set off a worldwide trade war, that has a devastating history. Everybody loses, because everybody follows suit, and all that happens is you get a great reduction in international trade."

What many fail to grasp, Sowell has written, is that “if the goods and services available to the American people are greater as a result of international trade, then Americans are wealthier, not poorer, regardless of whether there is a ‘deficit’ or a ‘surplus’ in the international balance of trade.”

Donald Ducks

With right-leaning members of Congress threatening to join with Democrats to limit the President’s unilateral tariff powers, condemnations of his sweeping global tariffs coming from economists on the left and the right, and the stock market meltdown, did Trump duck by pausing most of the tariffs for 90 days, and then, days later, making exceptions for semiconductors, cellphones and electronics?

It’s seems obvious that Trump’s scorched-Earth tariff roll-out didn’t go as planned, even to him. Explaining why he had suspended most of the tariffs for 90 days (except for China), he said “Well, I thought that people were jumping a little bit out of line…They were getting yippy, you know?” Yes, I know! People do tend to get a bit “yippy” when the stock market tanks and overnight your 401-k turns into a 301-k, or worse.

And yet while the president was busy waving the white flag, some of his advisors and the Republican Speaker of the House were busy claiming victory. Treasury Secretary Scott Bessent told reporters, “This was his strategy all along.” House Speaker Mike Johnson gushed (the Washington Post’s description): “Behold the ‘Art of the Deal.’” But what deal? The President didn’t pause many of the tariffs because Europe and our other trading partners fell to their knees and kissed the tariff ring—he paused them because the stock markets revolted.

I’m not an economist, and I didn’t stay in a Holiday Inn Express last night, but I’ve read enough about economics to know that tariffs are generally not a good idea. When broad-based tariffs have been used, they have usually failed and hurt, rather than helped, the American economy. That’s the consensus among economists—even more so among conservative ones.

“If decoupling from China is Mr. Trump’s goal,” writes the editors of the Wall Street Journal, “one way to mitigate the damage is by expanding trade with allies. But Mr. Trump’s tariffs slam friend and foe alike. Mr. Trump’s pause could give the Administration time to negotiate trade deals with many of his targets. But he’s not pausing his 10% base tariff on most countries.”

What then, does Trump really want? “There’s good reason to treat China differently given its often predatory trade practices,” says another Wall Street Journal editorial, “But if Trump is serious the best strategy would be to rally allies to the cause of fighting Chinese mercantilism.”

In a back-and-forth tit-for-tat, Trump has now raised tariffs on Chinese goods to 145%, and in retaliation China has raised its tariffs on American goods to 125%—essentially threatening to bring trade between the two nations to a standstill—while keeping the 10% base tariffs on goods from our trading partner allies. It’s true, there’s been “nothing like it.”

Yes, Trump should be standing up to China, but not by stepping on our allies and friendly trading partners.