Trump doubles down on trade war even as he grants one-month reprieve to US automakers

The reprieve followed last month’s temporary delay of the tariffs entirely — a decision that also followed a market sell-off.

Despite the partial cease-fire, Trump isn’t likely to end the trade war any time soon.

Tariffs are a foundational plank in his America First platform. They dovetail with his bid to expand presidential power over lawmakers and the federal bureaucracy, and extend the country’s territorial reach to Greenland and the Panama Canal.

The early weeks of the trade fight suggest Trump won’t get everything he wants.

The latest: In his Tuesday night speech to Congress, Trump ticked through all the reasons a trade war would be good for the United States while dismissing the risks.

“Tariffs are about making America rich again and making America great again. And it’s happening, and it will happen rather quickly,” he said. “There’ll be a little disturbance, but we’re OK with that. It won’t be much.”

Why it matters: In the short term, the “disturbances” could be substantial.

• Farmers stand to lose billions of dollars in sales as countries retaliate with duties on US agriculture exports.
• Inflation-weary consumers will be hit by price increases on everything from groceries to smartphones, sneakers, and toys.
• The Big Three automakers will see costs soar as tariffs disrupt their tightly integrated supply chains, which is why they pressed the president for some relief.

“The trouble with tariffs, to be succinct, is that they raise prices, slow economic growth, cut profits, increase unemployment, worsen inequality, diminish productivity, and increase global tensions,” David Kelly, chief global strategist at J.P. Morgan Asset Management, wrote in his weekly market outlook. “Other than that, they’re fine.”

The reaction: Investors believe a trade war will accelerate inflation and slow the economy. That could lead to 1970s-style “stagflation” — tepid growth and rapidly rising prices — or even a recession.

• Stocks recouped some of their recent losses on Wednesday, but the Standard & Poor’s 500 index is up just 1 percent since the November election after climbing more than 6 percent through last month.
• Yields on government bonds have declined on expectations Trump’s economic policies will hurt the economy.

Many corporate leaders are concerned that tariffs will hurt business.

“We’ve never seen this kind of breadth of tariffs,” Best Buy chief executive Corie Barry said on Tuesday. Suppliers will pass along at least some tariff costs, “making price increases for American consumers highly likely,” Barry said.

Sales pitch: The administration is seeking to convince business and financial leaders that tariffs will be good for the country in the long term.

“I think for folks on Wall Street who may be concerned, look at what this president did for you in his first term. Wall Street boomed. Stock market boomed. The president expects that to happen again,” White House press secretary Karoline Leavitt said on Wednesday. “But most importantly, Main Street is going to boom.”

Larry Summers, the Harvard economist who held top jobs in the Clinton and Obama administrations, said in a Bloomberg Television interview that Trump has “identified some important directions in which this economy could be made better,” such as reducing certain regulations and addressing areas where the United States had been taken advantage of in trade. But “the way we are going about it is something that seems very scary to me.”

Step back: In his address, Trump blamed Joe Biden for leaving behind “an economic catastrophe and an inflation nightmare.”

• Prices remain high after the worst bout of inflation since the 1980s, but the rate of increases slowed significantly in 2023 and 2024.
• Overall, Trump inherited a healthy — albeit cooling — economy.

The president said he would reduce energy costs by boosting domestic production, eliminate “flagrant waste of taxpayer dollars,” and erase the federal deficit. Oil and natural gas will likely get more expensive in the short term due to the 10 percent tariff Trump imposed on Canadian energy imports.

Final thought: Trump is determined to aggressively roll out other tariffs.

He said he would hit Europe with new duties. He plans to tax steel and aluminum imports. And he told Congress on Tuesday night that he would put into place reciprocal tariffs on all nations that have duties on US goods.

“Whatever they tariff us, we tariff them,” Trump said. “Whatever they tax us, we tax them. If they do nonmonetary tariffs to keep us out of their market, then we do nonmonetary barriers to keep them out of our market.”

Financial markets will almost certainly push back, forcing Trump to compromise.

Because fighting the tape is costly and almost always futile.

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Larry Edelman can be reached at larry.edelman@globe.com.