Why Trump’s tariffs won’t last long

Welcome back. I sketched two weeks ago Five optimistic scenarios for the global economy. The first was “Donald Trump diluted his tariff plans”. Now that the US President introduced his historical package of import duties, I will return to this idea. This week I was looking for the argument for why the US tariff prices will not stay high for long. I found the following.

First, the economic pain. In the short term, most forecasters expect Trump’s import duties to increase prices and slow economic activity. But the White House may have overestimated its ability to contribute political pressure.

Consumer mood falls in anticipation of the upcoming bad times. But when the latest tariffs actually hit supply chains, it will decrease.

Durable goods and not permanent objects such as food and clothing make up 30 percent of US budget spending. These are made to different degrees of higher duties. ((An estimate suggests that the price of an iPhone 16 Pro Max could jump from $ 1,599 to $ 2,300 if all tariff costs are passed on to consumers.)

Trump’s tariffs before April 2 have already increased the prices of the manufacturers. In view of the extent and scope of his latest flash, inflation could increase higher and Faster than expected. Ceiling tariffs limit the ability of the US providers to quickly find cheaper alternatives. Overall, Allianz Research expects around two thirds of the companies to pass on the costs to consumers.

The non -price effects of Trump’s agenda are also increasing: so -called department for state efficiency networking, which are announced after discharge a total of more than 280,000 In the past two months, existing tariffs and uncertainties have been attending attitude and investment plans.

This builds on economic concerns before Trump came in. A memory: The prices have risen by an average of 20 percent (with the cheapest ones that are inflation) since the beginning of January 2021, and debt complaints increase in republican states (which could be tightened if the US Federal Reserve keeps interest rates higher to ward off the tariff-linked inflation spiral). Overall, the threshold of the Americans is lower for quick, further pain than the President believes.

The targeted approach trading partners in their retribution will worsen. For example, the EU is developing the taxes that are aimed at republican states in Louisiana, beef in Kansas and products in Alabama-Als reaction to Trump’s steel and aluminum tariffs.

This is important because the approval ratings follow the consumer mood, especially for Republicans, when Trump is in power. And political concerns in the GOP rose before the “mutual” tariffs of the president.

Data from YouGov by collected by John Burn-Murdoch in the FT Trump’s economic approval shows among his non-Maga 2024 voters who quickly fall. A broader Republican consumer mood is now also at a turning point.

Since Trump introduced his latest tariffs, dissatisfaction has spread. A largely symbolic resolution to lift the tariffs against Canada was adopted in the Senate on Wednesday. Later a week, The FT reported A crack that appears between the top republicans for trade policy. GOP -Senator Ted Cruz (usually a convinced Trump trailer) also warned of a potential “bloodbath” for the Republicans in the intermediate elections in November 2026.

At least privately, companies can also become loud, says Marko Papic, chief strategist at BCA Research. “Existing US companies that use Americans on a larger level than a theoretical renaissance will be exposed to high costs and will lose business in foreign markets.”

The most important S&P 500-tech, banking and industrial shares have fallen. Apple experienced its largest one -day evaluation offset. The Tech Bros and Big Business Networks will exert pressure on contacts in the administration, and the stock portfolios of the high -ranking civil servants will suffer.

Small business owners who employ almost half of the private sector and are an important republican component now feel less optimistic. The plans for the end of the “de -Minimis” customary authority worldwide would be particularly painful for them.

The financial markets will need something spectacular to change Trump because its previous share prices overthrow the share prices.

“It is a bit like asking a pyromaniac to extinguish a fire that he started,” said Jonas Goltermann, deputy chief market economy in capital economy. “There is a certain level of pain, be it in stocks or other markets that would cause a kind of rethinking. But it is further away than most thoughts.”

Could the bond markets force him to change the course? The US finance ministries are currently falling because investors still consider them as safe haven assets. In a tail risk scenario, fiscal ruthlessness (e.g. stimulus measures in the midst of unreliable tariff income, doge savings or growth reviews), an increasing concept of concept (in view of the unpredictability of Trump) and a higher inflation or interest expectations (if high prices are anchored) could be combined. “In this case, (Scott) would probably have to try to convince Trump that his approach is not durable,” said Goltermann.

In both cases, the cumulative pressure of households, business, markets and republicans will use Trump even faster, now the tariffs are in full river. Delays, exceptions and reductions are possible.

Could the administration alleviate the blow by accelerating tax measures? Garrett Watson, Director of Political Analysis at Tax Foundation, is skeptical. He said to extend plans existing Tax cuts cannot be considered a profit of households. You would also not cancel the income of tariffs.

Watson added that the government’s plans for additionally Tax cuts can help. But The $ 2.9Tn It is estimated that Trump’s tariffs do not even compensate for the increase in the extension of the tax cuts. (In addition, the tariff revenue is difficult to forecast.) “Timing is also a challenge, the negative effects of the tariffs now use, while the tax package is passed on and even longer the profit line advantages.”

Even if we assume that the president puts on political pressure, there are other ways of how tariffs could decrease.

Intermediate states can lead to some limited tariffs. “All price peaks of tariff hikes in totemy articles can trigger emergency movements at lower prices. This almost always includes opening for imports” About the trade.

Next, a partially rollback could be plausible if trading partners offer him sufficient concessions. In fact, Trump has already shown a willingness to negotiate. The basic scenario of Allianz Research will be several bilateral deals by the end of this year to reduce the effective tariff rate of the United States by around 40 percent.

Then there is the bigger picture. Trump hopes that foreign investors will set up factories in America to avoid tariffs. In view of the associated time and the costs, a quick job and an investment boost that releases domestic economic pain is. Global manufacturers do not know how long tariffs will take, do not like uncertainty and require reliable supply chains (domestic or internationally).

However, the transition to America becomes a self -sufficient production center that is a more expensive, lengthy and less desirable process than Trump. The global goods industry is connected and more complex than in the late 19th century, when the United States had high tariffs over an extensive period of time. The opportunities for a protectionist wall are much greater today (see The newsletter of the past week).

International factory owners know that. Most were able to decide to suspend what would increase the pressure on Trump. This also means that US production probably does not grow so far that reducing tariffs is more difficult in the future, as defined industries tend to set them to keep them.

Sure, taxes could even be higher at short notice. But between the rapidly increasing economic pain, political pressure and the president’s preference for negotiations, there may be a greater chance that tariffs will be feared earlier than feared.

“He will surely pay a political price if there is nothing to show at the end of this chaos. And that is a real option,” said Maurice obstacle, Senior Fellow at the Peterson Institute for International Economics.

Even if Trump does not bend before the pressure during his tenure, it is difficult to see how a subsequent administration could justify to keep his taxes in place.

How long will Trump’s tariffs take in your opinion? Send your thoughts to freelunch@ft.com or on x @Tapperikh90.

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