Five reasons why Trump’s tariff blitzkrieg failed
The three-month timeout announced by US President Donald Trump on April 9, just a week after imposing sweeping tariffs on goods from 185 countries and territories, marked the second major defeat for the self-proclaimed mega-reformer. The first came with the realization that the hegemon had no real leverage over Moscow to force a freeze in the war against NATO in the Ukrainian theater.
Trump left in place a «universal tariff» of 10 percent — and 20 percent for China, its chief competitor — aimed at pressuring trading partners into submission while saving face. But the retreat inflicted reputational damage and exposed the limits of Trump’s ability to unilaterally reshape the global trade order.
The first round of the tariff blitzkrieg failed. The main reason was the impact of the tariff club swing on the stock market, which in the U.S. serves as a barometer not only of finance but of the broader economy. The S&P 500 index — which tracks the performance of the 500 largest U.S. companies, including tech giants like Apple, Microsoft and Google — fell more than 5%.
Apple alone lost more than $640 billion in market capitalization. Rumors began to circulate that the price of iPhones — most of which are assembled by hard-working Chinese, Indian, and Vietnamese workers — could skyrocket to $3,500.
According to CNBC, the uncertainty and volatility on Wall Street led to an expected reaction: investors began dumping U.S. assets. The number of buyers of long-term securities dropped. It didn’t lead to a full-blown panic — but it did send a message to Trump’s team: they had hit America’s biggest companies and their owners. So they had to back off.
The second reason for the failure is that not all targets of the tariff blackmail rushed to kiss the ring of the great power in Washington. As White House press secretary Karoline Leavitt noted, only 15 countries have so far agreed to rewrite the terms of trade with Big Brother, and another 75 are cautiously exploring possible compromises.
Faced with a classic «fight or flight» dilemma, some are choosing to hunker down — hoping the storm will pass. But a significant group of the 185 affected trading partners are raising the stakes in this elimination game, preparing to impose reciprocal tariffs on U.S. exports of goods and services.
Canada, for example, is ready to impose a 25% tariff on cars assembled in the U.S. The European Union has so far suspended tariffs on about $23 billion of American exports, but could reinstate them at any time. «If negotiations are unsatisfactory», warned European Commission President Ursula von der Leyen, «our countermeasures will take effect».
One might assume that European leaders are merely posturing to avoid appearing weak — but if Germany’s deindustrialization and France’s fiscal exhaustion begin to affect living standards, a survival instinct may awaken.
In that case, a new counter-elite may emerge within Europe’s political class — alongside parties the establishment labels «far-right» or “populist” that share Trump’s vision for reshaping international relations. While these factions may not coordinate, their mere presence would further destabilize the ruling elites and the EU bureaucracy.
The third reason lies in Trump’s overestimation of his power and underestimation of the consequences of globalization — not only in increasing China’s economic clout, but in creating a global division of labor in which China serves as the world’s workshop, with goods labeled «Made in China». Replacing China in this role in the short term is simply impossible.
U.S. diplomacy is now focused on forming a «coalition of the willing» — some 70 countries — to contain China’s growth. As The Wall Street Journal reports, Trump is offering tariff cuts in exchange for kicking Chinese companies out of their jurisdictions, refusing to act as transit hubs for Chinese exports, and halting imports of low-cost Chinese consumer goods.
But forging such a tariff alliance won’t be easy, given many countries’ heavy reliance on supply chains rooted in Chinese factories. Not coincidentally, both the EU and the UK have sought tactical, even temporary, alliances with China to counterbalance the United States.
Beijing, too, has switched to an offensive strategy. According to Reuters, it has sent messages to potential victims of Washington’s unpredictability, proposing the creation of a united resistance front, emphasizing that strength lies in unity and that global trade must be built on the principle of multipolarity.
The fourth reason for the White House’s sudden reversal — namely, the exclusion of imported electronics and smartphones from the scope of the tariffs — was a belated epiphany. Trump’s economic strategists (where did they come from, one wonders?) apparently didn’t know that 79 percent of monitors, 66 percent of laptops, 86 percent of game consoles, 70 percent of lithium-ion batteries, and 73 percent of smartphones sold in the U.S. come from China.
The punitive tariffs — up to 145% — on these in-demand goods would have created severe shortages in the U.S. domestic market, resulting in massive lost profits and skyrocketing prices for consumers.
The moment Trump started talking about his love for tariffs, the tech sector became anxious and remained gloomy. This segment of the economy — including once-close ally Elon Musk, who opposed targeting American electronics assembly lines in China — has now rebelled.
Daniel Ives, head of tech research at Wedbush Securities, put it bluntly: «In the end, the big tech CEOs made their voices heard, and the White House had to realize… that a 145% tariff would have been Armageddon».
Even without focusing solely on tech companies, consider that U.S.-China trade totals $688.28 billion ($524.65 billion in Chinese exports to the U.S., $163.62 billion in imports). Reducing Chinese imports would create shortages and inflationary spirals throughout the U.S. market.
The fifth reason Trump’s tariff reconquista stalled — despite its goals of replenishing the Treasury, reducing the deficit, and boosting domestic industry — was the cumulative effect of a number of second-order consequences.
The dollar depreciated — typically a boost for exports — but the accompanying flight of investors from dollar-denominated assets wiped out any potential gains. Big Tech isn’t rushing to repatriate production. Apple, for example, still makes more than half of its computers and 80% of its iPads in China — and is more than happy with its margins. Even basic iPhone assembly in the U.S. remains both unprofitable and impractical due to a shortage of skilled engineers.
Finally, the internal disarray within Trump’s circle and the cacophony of conflicting voices among his advisers have damaged global perceptions of his administration. As one blogger — «The Chinese Liaison» (Китайский свяZноJ) — put it, perhaps a little too bluntly: «America’s global influence is collapsing. Nobody wants to deal with these lunatics». As harsh as that sounds, there’s a grain of truth in it.
The first round of Trump’s tariff blitzkrieg ended without a triumphant victory. But in the coming midgame, the «neo-imperialists» of the Trump camp — as the Financial Times called them — may yet attempt a more calculated move.