Following the trade war in 2025 is like taking a series of punches to the belly. In a fabricated crisis, the US and China abruptly agreed on a 90-day detente: China has decreased its 125% duties to 10%, and the US has lowered its 145% levies on the majority of Chinese products to 30%. That somewhat softer blow to the belly is solace in the warped world of Trump 2.0.
Markets recovered all of the losses that had accrued following the president’s tariff rollout on April 2 when they jumped on Monday’s China news. To be clear, Wall Street is celebrating not because the news of 30% tariffs is fantastic but rather because it appears that President Donald Trump may not be able to support his own extreme economic policies.
If not for the 30% tariffs on America’s third-largest trade partner, 10% universal levies, and 25% sector-specific taxes, markets would have been in a frenzy. However, Trump has already driven financial markets to their breaking point following weeks of tariff unrest, setting a baseline expectation of economic hardship.
Investors bursting champagne on Monday did so because the likelihood of a recession has changed from likely to more of a coin flip, not because they believe we are out of the woods.
According to a Yale Budget Lab estimate, despite the most recent detente, the tariffs that are still in effect are predicted to cause consumer prices to increase by over 2% or $2,800 per household annually. According to the analysis, an additional 456,000 jobs will be lost by the end of the year, raising the unemployment rate by 0.4 percentage points by the end of 2025.
Kathy Bostjancic, chief economist at Nationwide Mutual Insurance Company, stated in a report on Monday that the US economy is still likely to develop more slowly. “Some dampening effects on activity have already occurred, and DOGE-related efforts to reduce the size of the government will also weigh on employment and activity later this year,” she continued.
The Trump administration’s larger-than-anticipated reduction in Chinese tariffs highlights the main grievance of companies, which is that Trump’s intentions and objectives seem to change every hour.
On Monday, economist Justin Wolfers asked my colleague Matt Egan, “What are the chances that we have ninety days of calm ahead of us?” “We have good news today, but it would be even better if someone simply took the button away from him.”
Following a “landmark trade deal” with the United Kingdom last week—which, as I wrote at the time, was more of an intention to work toward a deal that would ultimately affect only a small portion of America’s global trade pie—the White House, predictably, hailed the China breakthrough over the weekend as another Trump victory.
Undoubtedly, a 30% tax is easier to administer than a 145% one. A complete supply chain breakdown or just a slowdown in commerce between the two biggest economies in the world might result from that 115 percentage point decline. But only if you see the deal with China through a MAGA perspective is it a “win.” Trump got a single bucket of water after setting the home on fire. Maybe it’s a start. He’s still playing with matches, though, and some of the damage cannot be repaired.
