Will the markets make Trump see sense on tariffs?

This week Donald Trump declared ‘Liberation Day,’ unveiling a barrage of tariffs that had been trailed as correcting unfair trade practices overseas. In a theatrical Rose Garden ceremony, the US president presented a table, detailing a slew of new “reciprocal” tariffs targeting nations right across the globe.

Traditionally, trade reciprocity implies matching another country’s tariffs tit-for-tat. For instance, if the UK imposes a 10 per cent tax on US chicken, the US would impose the same import tax on British chicken. Many had anticipated that ‘Liberation Day’ would therefore introduce a complex array of tariffs reflecting the barriers other individual nations place on importing specific American goods.

Trump’s instincts instead took him in a much weirder direction. The president views trade deficits themselves as evidence of other countries exploiting the US, regardless of their actual trade policies. In his eyes, the US importing more than it exports equates to ‘losing’, which he sees as synonymous with underlying non-tariff barriers to trade or currency manipulation from trade partners, even when they aren’t taxing American imports heavily.