Long-term national policy or negotiation tactic? How to understand Trump's "crazy tariffs"?

Author: Alex Xu, Mint Ventures

Last week, at 4 PM Eastern Time on April 2 (after the US stock market closed), Trump announced his “reciprocal tariff” plan.

He divided the trade surplus of his main trading partner with the U.S. last year by its total goods exports, and then divided by two, to arrive at a new “equitable” tariff rate.

Where is the logic? It doesn’t matter.

They just need an excuse to start a war.

Subsequently, the global market, including crypto assets, fell into a bloody turmoil.

The current market’s expectations regarding Trump’s tariff plan are chaotic due to the question: Is the tariff increase a long-term national policy of the Trump team, or is it a negotiation strategy used to gain benefits from negotiation counterparts (trade partners, large enterprises)?

If it is the former, then perhaps, as many people say, this will change the global trade situation. The United States is moving towards isolationism, which is obviously detrimental to the global economy in the long term.

But if it is the latter, then perhaps the moment when the so-called “reciprocal tariffs” were announced on April 2nd is the peak of fear in this round of trade war. The subsequent major developments will still depend on the progress of negotiations among multiple parties, gradually reaching a consensus between the United States and bilateral or multilateral partners, leading to a gradual easing of market panic and a return of asset prices to their appropriate levels.

Although Trump previously promoted tariffs as a “national policy” during his campaign and after taking office, using tariffs to force the return of manufacturing is also a political commitment to the Rust Belt and lower-income voters, and his stance is exceptionally resolute.

But the author still tends to believe that tariffs are just his bargaining chips, and the ultimate goal of his negotiations is to achieve enough political achievements for himself, which may include:

• More overseas orders: Other countries are purchasing more American goods (grains, energy, weapons, passenger planes)

• More local job opportunities: Large companies invest in the U.S. to build factories (TSMC)

• Reasonable encirclement of competitors: Forcing countries that attempt to sit on the fence to unite with them, further encircling China (today, Vietnam and South Korea have announced high tariffs on steel exports to China)

In addition, the asset crash and recession expectations caused by tariff disturbances have also put immense pressure on the indecisive Powell. Trump cannot use executive power to force the Federal Reserve to lower interest rates, so what about the economy and stock market on the brink of collapse?

Therefore, as long as he and his group can withstand the current immense pressure, when seemingly illogical tariff demands gradually transform into results during negotiations, his reputation will gradually improve.

These achievements will be transformed into energy that further strengthens its political influence, becoming a justification for its further expansion of power, and helping the Republican Party gain an advantage in next year’s midterm elections.

So is there a possibility that Trump really sees tariffs as a long-term national policy, believing that tariffs can force the manufacturing industry to return, transforming the current hollowing out of American manufacturing and providing more jobs?

But the problem is that currently space and time do not allow it. The midterm elections for both houses are coming next year, and the long-term high tariffs causing economic recession, stock market crash, and asset inflation will inevitably lead to the Republican Party losing its currently thin majority in the House of Representatives (and possibly the Senate), making Trump a “lame duck president” in the remaining two years of his term, with policies becoming even harder to implement.

Currently, there is not enough time and space for him to engage in such long-term national policies. By the time the stock market is not doing well next year, and the tokens are not performing, he won’t be able to hold on even to short-term policies, let alone long-term ones.

So this possibility is still relatively small.

In fact, from the current perspective, less than a week after the introduction of reciprocal tariffs, as contacts with multiple countries have taken place, and after the actual negotiation interests have been confirmed, the Trump team has already begun to soften its stance on tariffs.

For example, today, Kevin Hassett, the director of the National Economic Council, stated: “Currently, more than 50 countries have contacted the White House to begin trade negotiations. President Trump is not trying to destroy the market by destroying the U.S. market.”

Immediately following, U.S. trade advisor Navarro spoke out: Trump seeks to reduce tariffs and non-tariff barriers. This guy is a major supporter of tariff policies within Trump’s camp, and recently he has been fiercely criticizing Musk’s free trade stance.

So, will there be any unexpected situations during this process?

It is also possible.

For example, negotiations between the United States and several of its most important trade partners have not gone smoothly, especially with the European Union and China. Currently, both have either already implemented countermeasures or threatened to do so if negotiations fail (April 13), and Treasury Secretary Basant warned on the day “reciprocal tariffs” were announced: do not retaliate, otherwise the U.S. will escalate.

This situation may lead to a stalemate in negotiations and even a short-term escalation of conflict (further increasing tariffs against each other), but considering that most other countries will actively negotiate with the United States, the likelihood of the overall situation being worse than it is now is not high.

After all, Trump’s core task remains to achieve more “political achievements” before next year’s midterm elections, rather than allowing high inflation and a collapsing stock market to ruin the second half of his term.

Therefore, going “crazy” a little earlier and negotiating a little sooner is more advantageous for Trump.

As the creator of “uncertainty,” Trump also does not want to face “uncertainty” before next year’s midterm elections.