President Trump’s initial move to impose substantial tariffs led to alarming instability in the U.S. gilt market, a critical component of the global financial system. This market turmoil forced Trump to announce a 90-day pause on his “reciprocal” tariffs. However, this pause does not signify an end to trade wars, as the U.S. has already imposed tariffs on steel, aluminum, autos, and a wide range of other goods, with even higher tariffs on China.
These high tariffs are expected to negatively impact both the U.S. and China, potentially causing recessions or significant economic slowdowns in both countries. The repercussions of these slowdowns could extend globally, affecting economies like India. While the U.S.-China trade tensions began under President Biden with a “small yard, high fence” strategy, Trump has shifted to a broader “high fence, entire yard” approach, which is predicted to disrupt supply chains.
Trump’s approach to trade negotiations is characterized by unpredictability and a focus on achieving a perception of victory. This creates significant uncertainty in the markets, despite any temporary ceasefires. Given Trump’s belief in tariffs as a tool to revitalize U.S. manufacturing, trade wars are expected to continue, with ongoing instability and potential economic consequences.