Donald Trump declared there to be “no room left” for a deal with Canada and Mexico this week, launching a trade war against his nation’s closest allies that he presented as an effort to protect America’s soul.
Then he pulled back. It wasn’t his first feint and retreat. It probably won’t be the last.
A day after imposing steep tariffs on his country’s neighbors, the US president announced a month-long reprieve for carmakers. The following day, tariffs were also suspended on almost all goods from Canada and Mexico.
Tariffs on China, levied at a 10% rate in February and doubled to 20% on Tuesday, remain in place. Trump and his aides are now trailing a fresh wave of tariffs in early April as “the big one”, with myriad markets – including the European Union – and industries in their sights.
Each abrupt and erratic jerk and jolt on policy in Washington reverberates around the world, with firms in the US and far beyond trying to keep track of developments from one day to the next – and figure out what they mean.
The architects of Trumponomics insist it will pave the way for a greater, more prosperous future. But firms are struggling to make out the economic landscape now, let alone what might happen next.
“When you have such a high level of uncertainty, and have a set of policies that seem to impact every part of the economy … it leads to businesses essentially being frozen,” said Sameera Fazili, former deputy director of the national economic council (NEC) under Joe Biden. “They’re not able to make investments. They’re not able to make plans. They’re not able to make hiring decisions.
“Because they don’t know where these policies are going to head. These policies are going to have such an impact on their bottom line.”
In the four short months since his election victory last November, Trump has threatened to impose tariffs on Canada and Mexico in January; threatened to impose tariffs on Canada and Mexico in February; threatened to impose tariffs on Canada and Mexico in March; briefly imposed tariffs on Canada and Mexico in March; revoked those tariffs on most goods; and threatened to impose tariffs on Canada and Mexico in April.
For companies attempting to navigate North America – from car manufacturers to juice makers – the world shifted, and shifted back, at a dizzying pace in a matter of days. “I don’t know how they navigate it,” said Fazili. “You can’t run a business with one-month cliffs around you all the time.”
“This is not a moment to celebrate,” Matthew Holmes, chief of public policy at the Canadian Chamber of Commerce, said after Thursday’s latest delay. “The economy is not a toy to play with. Constant threats and economic uncertainty have taken their toll.
“We see it in delayed business investments, shaky consumer confidence, stalled capital flows and a volatile stock market. People’s livelihoods are at stake.”
As a campaigner, Trump’s great political skill is his ability to use rhetoric – often brash, crude and even false – to bend perception of reality.
The president’s rhetoric can leave listeners with the impression that tariffs will revitalize America’s industrial heartlands, and fill up the federal government’s coffers with trillions of dollars from other countries, with only a minor impact on US consumers.
“The countries and companies that have been ripping us aren’t particularly happy with what I’m doing,” Trump told reporters in the Oval Office on Thursday. Sure, tariffs might bring about “a little short-term interruption” in the US economy, he conceded, but “I don’t think it’s going to be big”.
But the reality of tariffs is trickier. Tariffs are generally paid by importers, for starters – in this case, US companies buying goods from overseas – not exporters, who sell the products, or the countries where they are based. Many of these US firms quickly made plain this week that they would pass on these higher costs to their customers.
While Trump has used the threat of tariffs to encourage overseas firms to relocate their factories to the US, such longer-term investments are harder for executives to plan when they do not know which duties will be in place next week.
Seven weeks into his second term, as many Americans grapple with the cost of living after years of higher inflation, Trump continues to blame Joe Biden. “We inherited from the last administration an economic catastrophe and an inflation nightmare,” he said during his joint address to Congress on Tuesday night.
The US economy is not in a state of catastrophe, having shown remarkable resilience in the years following the end of the pandemic. The biggest issue has been inflation, which surged to its highest level in a generation three years ago, but has since fallen dramatically from this peak.
Presidents typically “move on quickly, or don’t criticize their predecessors by name”, said Larry Sabato, director of the Center for Politics at the University of Virginia. “Here’s another norm that Trump has exploded. Trump has no limits and his base lets him get away with anything. So expect it to continue.”
But should prices rise as a direct result of Trump’s decisions – as many economists and business leaders have warned – it will grow more challenging to blame Biden for day-to-day affordability challenges.
On the campaign trail last year, Trump repeatedly pledged to “rapidly” bring down prices from “day one” of his second administration. “A vote for Trump means your groceries will be cheaper,” he declared on the eve of November’s election.
Only after winning did he acknowledge how difficult this would be. “It’s hard to bring things down once they’re up,” he told Time a few weeks his victory. “You know, it’s very hard.”
It is one thing to play down higher prices and bills as “a little short-term interruption” when they’re a risk. Should they become reality, such rhetoric is less likely to wash.
“Once you’re in charge, you’re in charge,” said Fazili. “And if there’s a problem in the economy, people look to you to fix it.”
