There Are But Two Roads Out Of Tariff Hell

Trump takes neither.

This Wednesday, July 9th, marks the end of Trump’s 90-day pause on the reciprocal tariffs he threatened to levy on dozens of countries. The pause began shortly after the tariffs were announced on April 2, after the bond market sell-off forced Trump to postpone their implementation (in the meantime, the 10% base tariff, 30% China tariff, and numerous sectoral tariffs have remained in place). At that point, the White House touted that they’d have 90 deals in 90 days.

This was never going to happen and should have been given no more credence then my claiming I will acquire the ability to dunk the basketball in 90 days. I’m here today to say a few brief words about the implications of that failure.

In fact, I see but two and only two roads out of tariff hell, which is the place where tariff rules are never nailed down and the trade war ebbs and flows with no end in sight.

The first is to end the trade war. Declare victory and call it a day. My strong prior is that some perma-hawk protectionists would squawk and there’d be TACO noise, but the majority of Americans would be fine with this route. MAGA would view it as another win for their hero, chin-stroking pundits would applaud the president’s wisdom, and businesses that use imports would be massively relieved. Markets would rally bigly.

The second road out of tariff hell would be less well-loved, but would still be an improvement: nail down the deals. Just hammer out what the rates are and get on with it.

But team Trump is taking neither route. Instead, it’s all a big muddle with neither an end nor a resolution in sight.

The fear among business leaders is that the trade wars started when Trump took office don't have a firm end date — a worry that grows with each shifting deadline.

"Whatever deals there are going to be, let's just ink it and move on," Sue Spence, the chair of the Institute of Supply Management's manufacturing business survey committee, tells Axios.

Commerce Secretary Howard Lutnick recently said maybe they’ll hit 12 deals, though what they call “deals” is another significant source of uncertainty. If you’ve casually followed all this, you might think they reached a deal with Vietnam. But as the WSJ points out this AM:

But no documentation about the deal or those tariff levels has yet been released, and it remains uncertain whether Vietnam has actually agreed to the terms that Trump laid out. U.S. officials repeatedly pledged to release details of the deal on Wednesday after the president posted some of the highlights on his Truth Social account, but that still hasn’t happened.

“Currently, the negotiating teams of Vietnam and the U.S. are coordinating and engaging in discussions to concretize the topics covered by the two leaders,” a Vietnamese government spokesperson said at a news conference after Trump’s post.

At least some of the terms Trump laid out appear to be in question. While Trump posted that all U.S. goods would enter Vietnam tariff-free, the Vietnamese are working on exemptions to that rule that would still see some U.S. goods hit by tariffs, according to people familiar with the matter.

Same with China. The admin says there’s a mutually agreed-upon pact to ease their export controls, particularly on key metals and magnets, but no one’s seen it so there’s no way to discern whether export flows are consistent with the deal or, more importantly from domestic producers’ prospective, what to expect in terms of the imports they need to manufacture.

Another Trump official said yesterday: “…maybe things will push back past the deadline or maybe they won’t. In the end the President is going to make that judgment.”

What we have here is fundamental difference in Trumpian process and what the economy needs to grow. The President and his team don’t do details, and actual trade deals are nothing but that. But even more structurally problematic is that Trump is all about keeping his opponents, which in this case is every trading partner, off balance. His favorite line—one that explains everything about his approach to dealmaking—is about who “holds the cards.” Inking deals means the hand is over, and that’s not where he likes to be. But it’s exactly what businesses and and consumers need to move on.

There’s also a basic economic principle in play here. Tariffs are sales taxes on imports, once they’re locked in, they have one-off effects on prices and therefore production. They raise the level of prices, but unless they keep ratcheting up (or down), they don’t effect the growth rate. This, btw, is what Fed Chair Powell keeps banging on about. He’d like to “look through” the tariffs, meaning let them do their one-time thing to price levels and then get back to setting interest rates based on what’s necessary to hit full employment at stable prices (their mandate). But that’s hard to do when the ultimate tariff regime remains a constant work-in-progress.

As Robert Frost might have put it: Two roads diverged in a yellow wood. I took neither, and the economy suffered.