In the Oval Office on Thursday afternoon, Donald Trump signed the latest in a series of executive orders on trade, partially reversing the 25 per cent tariffs on Canada and Mexico that he had imposed just two days earlier.
The dizzying policy changes have sparked an equity market sell-off, concern from businesses and panic in foreign capitals fearful of a repeat of the chaotic decision-making of Trump’s first term, when he threatened and launched commercial battles with America’s largest trading partners, then backed down.
“There were three changes in 24 hours affecting us as a North American auto supplier, and that’s a little bit disconcerting,” said Jeff Aznavorian, president of Clips & Clamps Industries, an engineering group based in Plymouth, Michigan. “We can’t guess what or how or who at the moment. It’s like a whipsaw.”
Growing worries over Trump’s tariffs have deeply unsettled markets, with Wall Street’s S&P 500 tumbling almost 2 per cent on Thursday alone and putting it on track for its worst week since September.
But this time around, the tariffs Trump is imposing are steeper, are coming more rapidly and earlier in his presidency, and the cast of top trade officials has changed — and is even more loyal to his thinking.
While Peter Navarro, the hawkish manufacturing policy adviser, is still in the White House, Scott Bessent has replaced Steven Mnuchin as Treasury secretary — a role that is normally a voice for moderation on trade — and Robert Lighthizer, Trump’s influential former US trade representative, is gone.
Howard Lutnick, the Wall Street executive and Trump donor turned commerce secretary, has become the public face of the president’s changing policies in daily television appearances.
“The long-term trade of Donald Trump is you bet on him and he is a winner,” Lutnick said on Thursday on CNBC, showing no loss of faith in the president’s policies even as equity markets dropped again.
Lutnick has been working closely with Navarro and Jamieson Greer, a former trade lawyer who is now Trump’s US trade representative.
People familiar with Lutnick’s thinking have described him as being enthusiastic about using tariffs to force other nations into changing their policies to suit Washington.
Although the Trump administration initially attacked Mexico and Canada over drug trafficking and border security, in a call with reporters on Thursday, White House officials framed the tariff threats on Canada and Mexico as being “all about fentanyl”. Lutnick acknowledged that both countries had been “doing a better job” on closing their borders and that crossings by illegal immigrants were at “low record numbers”.
To investors, executives, foreign officials and US trade experts around the country, however, the chaos surrounding trade policy is disturbing.
“[The tariffs] are off, they’re on, they’re off, they’re 25 per cent, they’re 10 per cent . . . this is not a clear policy vision guiding things,” said Bill Reinsch, a former US trade official at the Center for Strategic and International Studies.
“He does something, and then the market tanks . . . or a whole bunch of people, like the auto executives, come in and tell him in some polite way, ‘this is really stupid’. And then they go back and rethink and change something.”
The current reprieve may be shortlived. The exemptions announced on Thursday will only last until next month. US tariffs on steel and aluminium are due to take effect next week and Trump’s plan for “reciprocal” tariffs on an array of imported products from many countries will start to kick in on April 2. The president has also threatened to place 25 per cent tariffs on imports from the EU.
Edward Alden, a senior fellow at the Council on Foreign Relations, said negative market reaction might be the “only” constraint on US trade policy.
“If we see a prolonged market downturn and the president is hearing from all his rich friends about how he’s messing up their portfolios and destroying their businesses, then maybe at that point he will think again,” Alden said.
Businesses have reacted with dismay at the erratic policymaking. “There’s a lot of uncertainty in business that we can’t control, but when people are doing things that are intentionally leading to chaos it makes it really hard to run a company,” said Traci Tapani, co-president of Wyoming Machine, a metal fabrication company in Minnesota.
She said her company wanted to invest in automation equipment but “we’re not pulling the trigger on it because of all this back and forth”.
Business groups have also expressed frustration. “Retailers are looking for stability in the supply chain, and the on-again, off-again nature of the announcements has made it very difficult to plan and prepare,” said Jonathan Gold, vice-president of supply chain and customs policy at the National Retail Federation.
Despite the unease, so far there are no tensions emerging within Trump’s trade team, unlike the conflicts between populist officials and traditional market-friendly conservative aides during his first term.
Instead there is consensus around Trump’s protectionist nationalism and his strategy to ratchet up commercial threats against US trading partners.
“He’s brought in people that are either more like minded with him or are more intimidated. It’s hard to say which,” said Reinsch.
While Bessent has conceded that tariffs could lead to a “one time price adjustment” during a speech at the Economic Club of New York on Thursday, he also said that US trading partners would have to make concessions to avoid them.
“If you want to be a numbskull like Justin Trudeau . . . tariffs are going to go up,” he said of Canada’s outgoing prime minister. “But I am happy to have a discussion with our foreign counterparts.”
But Cody Lusk, chief executive of the American International Automobile Dealers Association, which lobbies for US dealers who sell international nameplates, dubbed the tariff uncertainty a “calamity” for his sector.
“We’re a cash flow business, and anything that disrupts that is going to disrupt their ability to pay their employees, grow their businesses, pay their taxes,” he said. “Just a chain reaction of events.”
US carmakers, who lobbied hard for the reprieve, have expressed relief at Thursday’s announcement — although some officials pointed out that one month would not be enough to further rejig supply chains to increase the country’s manufacturing footprint.
But the delay benefits them more than their European, Japanese and South Korean counterparts. Foreign carmakers have a higher percentage of car components that are sourced from their home countries, which means more of their models are not eligible for the exemption.
“It’s very volatile. We should wait for judgment until it’s factual since there is a big negotiation taking place,” said an executive at a Japanese carmaker.
Additional reporting by Claire Bushey in Chicago, Kana Inagaki in London and Patricia Nilsson in Frankfurt
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