100 Days of Trump’s Tariff Shocks: Five Takeaways
April 29 marked U.S. President Donald Trump’s 100th day in office of his second presidency. During this period, President Trump issued a series of executive orders and proclamations to trigger an unprecedented global tariff war, pitting America against allies and foes around the world.
Within a span of merely three months, the tariff policies originating from the White House, characterized by the initial imposition of tariffs under various statutory authorities and subsequent suspension, have significantly altered the trade relationships of the United States with the rest of the world. This has disrupted global supply chains and induced volatility in financial markets, thereby generating widespread policy uncertainty.
“A Tariff Man”
During his first presidential term, Trump called himself a “Tariff Man” in a social media post in 2018. His conviction that tariffs are the solution to bringing jobs and factories back to the U.S. dates way back to the 1980s, when he was not in politics. Unlike issues such as abortion, tariffs and trade protectionism constitute the most consistent elements of his core political belief. He firmly believes that higher tariffs will usher new investments in America and would push other economies to enter into favourable bilateral trade deals to avoid U.S. tariffs.
During the election campaign, Trump called the word tariff “the most beautiful word in the dictionary” and promised to impose hefty tariffs than those imposed during his first term. On his first day in the White House in January 2025, he issued an executive order directing his team to unleash expansive tariffs on America’s trading partners. Trump even threatened 100% tariffs on BRICS nations if they seek to pursue de-dollarisation drive.
Using tariffs as a bargaining tool, Trump believes that the imposition of tariffs on the entire world will incentivise manufacturers to bring back factories and jobs to revive manufacturing in the Rust Belt and beyond, which has suffered massive deindustrialisation from the globalisation of trade since the 1980s. In his worldview, tariffs are necessary to restore America’s manufacturing base, which is viewed as critical to national security. He also aims to use tariffs as a tool to force foreign markets to be wide open for American products. “President Trump refuses to let the United States be taken advantage of and believes that tariffs are necessary to ensure fair trade, protect American workers, and reduce the trade deficit—this is an emergency”, states the factsheet issued by the White House on 2 April 2025.
On-Again, Off-Again Tariff Strategy
On 2 April — Trump declared it a “Liberation Day’’ — he announced a series of “reciprocal tariffs” that affected nearly all goods imported into the United States. He announced a minimum 10% tariff on all US imports and much higher tariffs on imports from 57 countries. The implementation of these tariffs would have increased the average effective US tariff rate from 2.5% to an estimated 24%, more than the tariffs enacted by the Smoot-Hawley Act of 1930, which exacerbated the Great Depression. Trump invoked his authority under the International Emergency Economic Powers Act of 1977 (IEEPA) to unleash his aggressive agenda of tariff hikes.
In a stunning reversal that came less than 24 hours after reciprocal tariffs went into effect, Trump suspended tariffs on dozens of countries for 90 days while further increasing them on China. The primary reason behind Trump’s turnabout on tariff policy was the sharp surge in U.S. government bond yields (bond prices move in inverse relation to their yields) and broader market volatility not seen since the early days of the COVID-19 pandemic. The selloff pressured U.S. government bonds and the dollar, which form the backbone of the global financial system.
In normal times, tariff hikes are usually associated with currency appreciation, but the government bond sell-off coupled with a weakening of the dollar suggested a marked shift in investor sentiment away from U.S. denominated assets, raising questions about the traditional safe-haven status of US government bonds and the dollar’s role as the world’s reserve currency. Essentially, the bond market sell-off triggered the on-off approach to tariffs by the Trump administration.
As of today, a 10% blanket duty on almost all U.S. imports remains in effect, while tariffs on many Chinese imports have been hiked to 125%. The Trump administration has announced a tight timeline to broker bilateral trade agreements with 75 foreign countries before the 90-day pause in reciprocal tariff expires.
Five Takeaways
During his first 100 days in office, Trump attempted to reset the rules governing global trade that had been in place for decades. The first 100 days in office may not be adequate to comprehensively assess his erratic approach to tariffs and overall trade policy stance, but may provide sufficient clues to infer his understanding of trade issues and what to expect from the Trump administration in the coming days.
Here are five takeaways on tariffs and trade policies from the first 100 days of Trump 2.0:
Obsession with Trade Deficits
President Trump’s obsession with bilateral trade deficits has no basis in trade economics and is fundamentally flawed. He posits that a trade deficit between the United States and another country indicates that the latter is engaging in unfair trade practices, thereby “ripping off” America and posing a potential threat to national security. Consequently, he has prioritized the reduction of U.S. trade deficits by imposing higher tariffs on foreign trading partners. His simplistic method for calculating reciprocal tariffs lacks the methodological rigor typically associated with the field of trade economics.
A trade deficit occurs when a country imports more goods and services than it exports. In 2024, the United States exported US$3.2 trillion in goods and services while importing $4.1 trillion, creating a $900 billion trade deficit. The $1.2 trillion goods deficit is partially offset by services surplus. Major exports include services like tourism and finance, along with goods such as aircraft and petroleum.
A country’s overall trade deficit differs from its bilateral trade deficits. The United States has both a large global trade deficit and significant bilateral deficits with individual countries. However, a country can maintain bilateral deficits with some nations, surpluses with others, while having balanced overall trade. Thus, even if the U.S. resolved its overall deficit, it could still have bilateral deficits. Not all trade deficits are inherently bad as evidenced by South Korea, which ran trade deficits for decades by importing capital goods and machinery to enhance manufacturing capabilities and boost exports. Large trade deficits can also indicate a robust domestic economy, as they may result from increased consumer spending and imports.
Similarly, trade surpluses are not inherently good and indicative of robust economic growth. Both Japan and Germany have experienced substantial trade surpluses for decades, yet they have experienced low to moderate economic growth.
Given that a trade deficit reflects an imbalance between a country’s domestic savings and investment rates, nothing stops Trump to implement policies aimed at increasing domestic savings. Such measures would facilitate the funding of domestic investment, thereby contributing to a reduction in the U.S. trade deficit. Furthermore, if Trump is earnest in his intention to diminish the trade deficit, he should close substantial budget deficits by imposing higher taxes on America’s billionaires and large corporations. Regrettably, Trump has not shown any inclination to address the underlying causes of trade deficits pertaining to the domestic policy arena.
Overlooking the Trade Surplus in Services
President Trump has concentrated his concerns narrowly on trade in goods, thereby neglecting the trade surplus in services. The United States holds a global competitive advantage in the export of services, including finance, travel, digitally-enabled services, software, and intellectual property. The service sector accounts for approximately 72% of the U.S. GDP. The U.S. consistently exports more services than it imports, resulting in a large trade surplus.
Applying a similar line of reasoning as that of Trump, one might ask whether the United States is ripping off the European Union, China, Canada, and other nations with which it maintains a trade surplus in services?
Misusing Emergency Powers to Impose Broad Tariffs
By using IEEPA to impose broad tariffs, the Trump administration has undermined the U.S. Constitution and its separation of powers between Congress and the Executive in matters of trade, national security, and emergency economic policy. It is important to note that the IEEPA does not explicitly confer tariff authority upon the President, nor has it been previously employed to impose tariffs. The words “tariff” or “customs duty” are absent from the statute of IEEPA. Consequently, the implementation of extensive tariffs under this legislation may be subject to congressional action or potential legal challenges in the future.
The U.S. Constitution endows Congress with the exclusive authority to levy tariffs and other taxes, as well as to regulate commerce with foreign nations. Nearly five decades ago, Congress enacted the IEEPA to empower the President to act expeditiously in safeguarding national security. This authority was not intended to circumvent Congress in matters of trade policy. Moreover, there is no direct correlation between broad-based tariffs on all imports of goods and the declared national emergency.
Tariffs Alone Cannot Revive Manufacturing
Attributing the decline of American manufacturing solely to cheaper exports by trading partners is a misconception, as frequently asserted by Trump and his cabinet colleagues. Technological advancements, coupled with increasing national wealth that resulted in elevated domestic labor costs, were the primary catalysts for the relocation of the manufacturing industry to countries with lower production costs. A parallel trend was observed in the services sector, as numerous US companies transferred their information technology and IT-enabled services, including call center operations, to overseas locations to reduce costs and enhance efficiency.
To facilitate the resurgence of manufacturing industry in the United States, a comprehensive strategy beyond tariffs is necessary, encompassing the establishment of an industrial policy, the provision of long-term patient capital through development banks and other financial institutions, a highly skilled labour force, the upgradation of physical infrastructure, and the regulation cross-border capital flows. The U.S. current economic model, driven by Wall Street and financiers, is inadequately equipped to facilitate the resurgence of manufacturing in the country.
Some Unintended Consequences of Tariff Shocks
Domestically, the most immediate consequences of Trump’s tariff shocks are likely to be an increase in inflation and a deceleration of economic activity. Lower-income Americans are likely to be disproportionately affected as the prices of essential goods, such as groceries, will increase. The Federal Reserve will need to maintain higher interest rates to manage inflation, which will consequently raise the cost of obtaining loans.
For international trading partners and investors, the primary challenge lies in managing the unpredictability of United States policy concerning tariffs and cross-border trade. How long tariffs will remain in place? What form will the tariff strategies of the Trump administration take in the forthcoming months? What will happen after 2028 when Trump’s second term expires?
With China emerging as the predominant trading partner for a majority of countries in the world, its status in the international economy has undergone significant transformation over the past two decades. Following the global financial crisis of 2008, China advanced a “dual circulation” economic strategy, wherein domestic circulation is positioned as the cornerstone of the Chinese economy to enhance resilience against external shocks. In anticipation of potential decoupling from the United States, China has actively sought alternatives by diversifying its exports, reducing reliance on the American market, establishing new trade corridors through Central Asia, Africa, and the Middle East, advocating for regional trade networks, and fortifying its domestic economy through robust industrial policy. Domestically, China is implementing a proactive policy approach, characterized by reduced interest rates, an enlarged fiscal policy, and support for technological innovation.
Given Trump’s unilateral dismantling of global trade rules, there is a strong possibility that China is being positioned as a key “anchor” of stability in the global trading system. This is particularly pertinent amidst the uncertainties engendered by trade tensions and the resurgence of protectionism. China’s commitment to multilateralism and open trade may lead to new geopolitical realignments, significantly increasing China’s influence in shaping global trade rules, a scenario Washington dislikes.
Image courtesy of The White House (Flickr)