He vowed: “My policies will never change.” He insisted: “Sometimes you have to take medicine to fix something.” He boasted: “I know what I’m doing.” And at 9.33am on Wednesday, he entreated: “BE COOL. Everything is going to work out well.”
But less than four hours later, Donald Trump blinked. As the economic and political pressure became unbearable, the US president announced on social media that he would pause for 90 days higher trade tariffs for most countries, excluding China.
It was a dramatic climbdown by a leader who has spent years cultivating the image of a strongman able to project indifference through every storm. White House aides immediately swung into gear, attempting to spin the retreat as the masterstroke of peerless dealmaker and genius chess player.
The damage had been done, however. Damage to America’s standing as an honest broker and dependable ally. Damage to the US dollar and financial system as the world’s anchor of financial stability. And damage to Trump’s reputation on his signature issue, the economy, in the eyes of business leaders, Republicans and voters.
“It’s obviously far too soon to talk about a failed presidency, but to me there are clear indications that Donald Trump’s presidency is endangered,” said Larry Jacobs, director of the Center for the Study of Politics and Governance at the University of Minnesota. “That’s an extraordinary statement for month three, but he’s taken such extreme measures and the responses are unusual, particularly for Republicans. They’re very demonstrative and they’re very directed at his power.”
The past two weeks have witnessed the most volatile period for financial markets since the coronavirus pandemic lockdowns five years ago. This time, however, the cause is not a highly contagious virus but the grievances and whims of one man.
On 2 April, standing in the White House Rose Garden, Trump announced sweeping “reciprocal” tariffs on dozens of countries, billing it as a “declaration of economic independence” on a “liberation day” that would restore America’s “golden age”. After decades of getting ripped off, he claimed, “it’s our turn to prosper”.
The tariffs were calculated based on a country’s trade deficit with the US divided by the value of goods imported from that country. The formula was immediately criticised for inaccuracies and absurdities, such as assigning tariffs to Heard Island and McDonald Islands, which are inhabited entirely by penguins.
Yet in Trump’s telling, the long-threatened tariffs were a necessary measure to restore US manufacturing and address trade imbalances. The Rose Garden event was attended by workers in hard hats and yellow construction vests – a reminder of how Trump has sought to steal Democrats’ identity as the party of the working class.
Some analysts on the left and the right agree that the US industrial midwest was hit hard by globalisation with factories shuttered, communities hollowed out and jobs shipped overseas. But few believe that Trump, who for decades has believed that the US is getting ripped off, and his sledgehammer approach to tariffs are the right solution.
Bill Galston, a senior fellow at the Brookings Institution thinktank in Washington, said: “I have always believed that his understanding of when America was great was in the 1950s and 1960s, when 30% of the workforce was in manufacturing and when the rest of the world was flat on its back and America bestrode the world like a colossus.
“His dream is to restore that America to the greatest extent possible, and he genuinely believes that high tariff walls will force people who are doing manufacturing in China and all across south-east Asia and elsewhere to come here.”
Galston added: “It is, most economists would say, a fantasy that could make a difference at the margins. Right now, manufacturing employment in the United States as a share of the total is 8%, down from its peak above 30% in the 1970s, and that’s not going to be reversed.”
Trump had effectively taken the world economy hostage. The repercussions were immediate and widespread, including market instability, strong international condemnation, retaliatory measures from China and deep uncertainty for businesses and consumers.
Larry Summers, a former treasury secretary, described it as “the biggest self-inflicted wound we’ve put on our economy in history”. Some chief executives who had backed Trump in last year’s election expressed buyer’s remorse as their fortunes sank. Tech giants such as Apple saw their stock prices drop; analysts predicted potential price increases for iPhones by as much as 43%.
In the White House, Trump’s closest advisers were rattled. Elon Musk, the world’s richest man, engaged in a highly public and insulting feud with Trump’s trade adviser Peter Navarro over the impact of tariffs on Tesla, calling Navarro a “moron” and “dumber than a sack of bricks”.
Trump insisted he was right and elite opinion was wrong. As he blithely golfed over the weekend, even as markets crashed and haemorrhaged trillions of dollars, the treasury secretary, Scott Bessent, flew to Trump’s Mar-a-Lago estate in Florida to plea for a strategy that could include improved trade deals with foreign countries.
Republicans were anxious as they heard the complaints of constituents worried about retirement savings. Some spoke out or considered legislation to curb Trump’s tariffs power. Senator Ted Cruz, a staunch Trump supporter, warned: “Tariffs are a tax on consumers, and I’m not a fan of jacking up taxes on American consumers.”
It was a notable break from a party long criticised for a sycophantic, cultish devotion to Trump on all other issues. James Bennet, a columnist for the Economist magazine, told the Guardian’s Politics Weekly America podcast: “There are limits to how far Donald Trump can go and it is conceivable that Republicans could rise up against him.
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“They haven’t been willing to do it as Donald Trump has embarked on this campaign of retribution, using the justice department to punish his foes. They haven’t been willing to do it over speech issues or the deportation of completely innocent people to a prison in El Salvador. But these tariffs were a step too far for them and that’s a signal that there is the possibility of Republican resistance at some point to this administration, which is the only thing that can really restrain it.”
The mounting pressure from Republicans, business leaders and financial markets stoked fears of a recession that could even tip into a depression. Finally, Trump yielded and, on Wednesday, announced a 90-day pause for most countries while inviting them to negotiate bilateral trade deals.
Antjuan Seawright, a Democratic strategist, said: “He saw the pressure from not only the American people but he saw people from within his own ecosystem screaming and yelling about how bad this was. Donald Trump has a history of caving because he is a paper tiger leader in many ways and this was just further proof of that. He wants to play hardball but with a soft bat.”
White House aides argued otherwise, deploying the Trump playbook learned from his lawyer Roy Cohn: always claim victory and never admit defeat. Stephen Miller, White House deputy chief of staff, tweeted: “You have been watching the greatest economic master strategy from an American president in history.”
But the president himself admitted that he had been monitoring the bond market and people were “getting a little queasy” as bond prices had fallen and interest rates increased. He said: “People were jumping a little bit out of line. They were getting yippy.”
Even Trump, whose second term has been characterised by audacity, impunity and brazen lies, had reached the capacity of his reality distortion field and its amplification by rightwing media. The cold facts of the market were not to be denied.
Kurt Bardella, a strategic communications adviser, said: “We’re seeing now, for the first time in Trump 2, the limitations of propaganda, of drinking your own Kool-Aid. There are economic realities, market realities that are larger than the lie that they tell themselves and the American people over and over again. Their attempt to try to sell that lie to the world clearly did not work.
“He can go out there all day long till he’s blue in the face and say to friendly media and his Maga puppets [that] we’re being ripped off and this will lead to the greatest economic boom we’ve ever seen – but no one else is believing it. The private sector that he has propped himself up on for so long completely rejected all of this.”
Bardella, a former congressional aide, added: “For all the ‘Let’s run the government like a business’ crowd, if any business ran themselves this way there would be a vote of no confidence and that CEO would be ousted that very day for deliberately tanking that company’s own stock.”
After an initial surge, the markets dipped again. While the pause has offered a temporary reprieve, a 10% blanket duty on almost all US imports remains in effect. Karoline Leavitt, the White House press secretary, claimed on Friday that more than 75 countries have contacted the Trump administration with a view to addressing trade issues. “The phones have been ringing off the hook to make deals,” she said.
But it remains uncertain whether the US will be able to secure significant concessions from other countries within 90 days. The mercurial nature of Trump’s decision-making on the on-again, off-again levies could add to the whiplash while eroding faith in the US and the reliability of the dollar.
And the trade war with China continues to escalate, posing a significant threat to the global economy. Trump raised tariffs on China to 145%, prompting retaliation. US consumers are likely to feel the pain from price hikes on clothing and other products. China also threatened further non-tariff measures, such as blacklisting US companies and restricting exports of rare earth minerals.
Larry Sabato, director of the Center for Politics at the University of Virginia, said: “It’s not over at all. The worst part is probably ahead because of China. Is he going to work out a deal with all these other countries? Get real. He has scrambled everything and America is no longer trusted in any sphere now – defence, international relations, economics. It’s sad.”
