By flip-flopping on his tariff “strategy” in mid-April, he briefly encouraged markets to believe that there was a “Trump put” to protect the bond and stock markets. But now, he has decided, on a whim, that the EU deserves to be hit by an even larger across-the-board tariff than he initially proposed on April 2 — though he has already issued another pronunciamento delaying the 50% levy until July 9.
After a few weeks of relative calm in financial markets, following the tariff chaos US President Donald Trump unleashed on “Liberation Day” (April 2), Trump’s impatience for perceived results has returned. Having realised that there is no easy deal to be made vis-à-vis Russia and Ukraine, he is on the cusp of abandoning that effort. He will turn his attention to softer targets: the EU — which he is now threatening with a 50% tariff — and Harvard University.
One doubts that Trump has considered the costs of these erratic moves, especially as far as the dollar is concerned. In March, I pushed back on the conventional view that tariffs would be bullish for the US dollar (by reducing the supply of greenbacks held by foreign countries), because I expected any strengthening effects to be more than offset by the blow to US credibility. I was right, and yet Trump is now doubling down on the same behaviour.
