Is President Donald Trump backtracking on tariffs? Wall Street certainly thinks so. While it appeared that the administration would be playing hardball after “Liberation Day” on April 2, mixed messaging from the Oval Office and the president’s Truth Social account indicate they are softening their tone on trade. The positional shift might perturb MAGA country, but it has pleased the financial markets this week. Has the damage been done, or is there still time to reverse course?
US-China Tariffs
In an April 22 Oval Office news conference, Trump told reporters he would "be very good to China" and would not "play hardball" with Chinese leader Xi Jinping. He also noted that a potential US-China trade deal would not result in tariffs anywhere near as high as 145%, adding that the current tariff regime "will come down substantially, but it won't be zero."
"They are going to do very well, and I think they’re going to be happy, and I think we’re going to live together very happily and, ideally, work together," Trump said at a swearing-in ceremony for new Securities and Exchange Commission Chair Paul Atkins.
These comments came shortly after White House Press Secretary Karoline Leavitt quoted President Trump as saying the administration was "doing very well" and "moving in the right direction" toward reaching a trade deal with Beijing.
In addition, Treasury Secretary Scott Bessent turned bears into bulls when he said both sides could de-escalate in the "very near future." Because the United States and China have effectively created an embargo due to their high tariff rates, the situation is unsustainable and will force both governments to start talking.
A day later, investors' hopes were dashed as Bessent told reporters on the sidelines of the spring International Monetary Fund (IMF) and World Bank meetings that it could take Washington and Beijing two to three years to create a trade framework.
Media reports are circulating that the Trump administration could lower its tariffs to begin trade negotiations. So far, the president has not suggested he will entertain this idea, telling the press that the "ball is in China's court" and that the United States does not "have to make a deal with them."
But while US officials have adopted a more cordial tone, the Chinese Communist Party has not. “China’s position is consistent and we are open to consultations and dialogues, but any form of consultations and negotiations must be conducted on the basis of mutual respect and in an equal manner,” said Ministry of Commerce spokesman He Yadong. “Any claims about the progress of China-U.S. trade negotiations are groundless as trying to catch the wind and have no factual basis.”
Right now, the United States maintains 145% blanket tariffs on Chinese goods. Likewise, China has a 125% tariff rate on US goods entering the world's second-largest economy.
A Tale of Two Streets
Corporate America is losing its patience with Trump’s trade agenda. It is the first-quarter earnings season, and scores of corporations are ringing alarm bells about higher tariff-driven prices.
Procter & Gamble, the maker of Pampers, Crest, and Tide, said it will likely begin to raise prices on some of its products by July as tariffs travel through the global economy. PepsiCo stated that its operating costs will climb because of higher levies, saying consumers will likely pull back their spending on sugary beverages. Tesla Motors also expressed concern about tariffs despite having the most American-made automobiles in the world.
Economic experts have warned of a potential summer slump amid trade strife. Federal Reserve Bank of Chicago President Austan Goolsbee said in a recent CBS News Face the Nation interview that economic activity could be “artificially high” because of companies front-running tariffs and consumers scrambling to purchase big-ticket items.
"We heard a lot about preemptive building up of inventories that could last 60 days, 90 days,” Goolsbee said. “That activity might look artificially high in the initial and then by the summer, might fall off, because people had bought it all and brought it forward.” He added: “But there’s just a lot of question marks. We don’t know 90 days from now, when, when they’ve revisited the tariffs, we just don’t know how big they’re going to be.”
However, as large companies air grievances over higher import costs, smaller businesses appear to be ebullient over the president’s broader trade objectives. According to a new PublicSquare-RedBalloon Freedom Economy Index, 48% of small business owners are more supportive of tariffs than two months ago. Additionally, 70% anticipate long-term gains for the US economy through the president's tariff agenda. Roughly one-quarter (29%) have endured higher costs because of tariff mania, and 61% reported no price changes.
“Small business owners are sending a clear message: they’re all-in on tariffs to bring manufacturing home,” said Michael Seifert, the CEO of PublicSquare, in a statement. “This isn’t blind optimism—it’s a calculated bet on America’s economic future.”
The Waiting Game
Is President Trump holding a pair of twos and bluffing his way to achieving a superior trade agreement with China? The current tone is vastly different than the bombastic and even poetic speech he made at the White House’s “Make America Wealthy Again” event earlier this month. Wall Street pleads with Trump to change course, but Main Street could send a different message to 1600 Pennsylvania Avenue. In the end, it might be an Art of the Deal playbook or a reversal. Whatever the case, it will be a waiting game.
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