President Trump’s trade war could have ended badly.
In the first months of 2025, Donald Trump played a game of Russian roulette with the American economy and survived. Although the president had never hidden his enthusiasm for tariffs, the way he went about implementing them on taking office sowed confusion. Targeting not just geostrategic competitors like China but also allies like Canada and Britain, issuing demands that economists struggled to explain, reversing world-shaping policies from one hour to the next, and doing all of this on doubtful constitutional authority, sent markets into a tailspin.
And just when the president had been enjoying a honeymoon. In the last days of January, a majority of Americans had declared themselves—for the first time—Trumpians. They were particularly optimistic about his economic plans. But their enthusiasm diminished as the rumble of artillery from the trade war grew louder. By mid-April, fewer than 40% backed the president’s policy, and Trump was less popular than he had been at the same point in his first term.
After a May meeting, the United States and China have stepped back from the astronomical tariffs that each imposed in the course of the spring. Western capitals and Western capital have calmed, and much of Trump’s trade plan is going into effect. But American voters have now experienced a sense of insecurity and arbitrariness that they will not soon forget. For a while, previously unthinkable things became thinkable: recession, depression, lost savings, a premature end to the second Trump Administration—in short, a host of confidence-sapping memories that may yet imperil the president’s ability to govern.
Chronology of a Crisis
A tariff is a government tax on an import. Although the authority to set tariffs belongs to Congress under Article I, Section 8 of the Constitution, Trump claims a 1977 law gives him the prerogative in emergencies. At the start of February, citing the flow of fentanyl and illegal immigrants, he imposed by executive order 25% tariffs on many Canadian and Mexican goods, and 10% tariffs on Chinese ones. China retaliated with tariffs of the same amount, showing a readiness for reprisals that threatened a trade war. Mainstream economy-watchers couldn’t wrap their heads around the idea that any modern nation might want such a thing. When Trump announced a 30-day pause on Canadian and Mexican tariffs, it was natural to assume he was looking for a face-saving way to climb down from a mistake.
He was not. At the start of March, back came the tariffs on Canada and Mexico. Canada retaliated. Mexico threatened to. Trump pulled back on automobile tariffs but bumped up the Chinese tariff by ten points. On April 2, which he billed as “Liberation Day,” Trump announced 10% tariffs on all imports, along with special “reciprocal” tariffs that varied from country to country. The total tariff came to 34% for China, which announced it would tariff U.S. goods at the same rate. Within a week Trump had changed the Chinese tariff to 125%, topped off with the remaining “fentanyl” tariff of 20%, for a total of 145%. China raised its tariff on American goods to 125%, stopped buying Boeing planes, and blocked the export of certain components crucial to American manufacturing.
The situation had turned into what journalists were calling a “bilateral embargo.” That spooked Trump officials. By mid-April, the S&P 500 had fallen 20% below its 2025 peak. The market for U.S. debt was softening, too, with ten-year borrowing rates climbing two-thirds of a point in just three days. Although stocks showed signs of recovery in the weeks that followed, business experts described the alarming ways that not just American shoppers but also American manufacturers were dependent on Chinese goods—here a factory that cannot obtain its compressors anywhere else, there a workshop that uses magnets made of rare earths on which China has cornered the market. Far from revivifying American industry, these experts warned, tariffs could endanger it, with apocalyptic consequences by summer if trade routes were not reopened. On April 22, Trump’s visibly uneasy Treasury secretary Scott Bessent described the situation as “unsustainable.” The White House sought to open channels with China. The countries met in Geneva on May 12, and agreed to dismantle the punitive tariffs for three months—reducing rates to 30% for the U.S. on China and 10% for China on the U.S. The rates were high by the standards of recent history, but survivable. The tariff crisis was over, for the time being.
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