Trump’s latest tariff salvo is all bark and no bite – for now

(CNN) — To hear President Donald Trump tell it, Thursday’s new tariffs announcement was a significant and sweeping order that will bring the world to heel. But the plan, as it were, consisted of a vaguely worded memo that offered few concrete details and no real timeframe for when they will kick in.

Wall Street, which broadly hates tariffs, reacted with relief. The S&P 500 bounced 1% higher, the tech-heavy Nasdaq was up 1.5%, and the Dow rose 360 points, or 0.8%.

Trump started the day posting on Truth Social that Thursday’s announcement was “the big one.” On the campaign trail, he promised that America would enact reciprocal tariffs that would even the score with foreign countries that trade unfairly with the United States. Trump has suggested reciprocal tariffs could match other countries’ import taxes dollar for dollar.

“They charge us a tax or tariff, and we charge them the exact same,” Trump told reporters Thursday in the Oval Office.

That’s not what was announced Thursday. The memorandum Trump signed in the Oval Office ordered government agencies to “work strenuously to counter non-reciprocal trading arrangements with trading partners by determining the equivalent of a reciprocal tariff with respect to each foreign trading partner.”

In other words: Figure out a plan to make trade fairer.

That could mean a great number of things, as evidenced by the White House’s fact sheet on its reciprocal tariff plan, which called out a wide variety of perceived offenses – from Europe’s ban on some shellfish imports to Brazil’s high ethanol tariffs. It’s not clear how or if the plan could persuade countries to buy more American exports or build more factories in the United States, but Trump seemed to think his tariff plan would do just that, creating more American jobs.

“If you build here, you have no tariffs whatsoever. And I think that’s what’s going to happen. I think our country is going to be flooded with jobs,” the president said Thursday.

Some economists reacted to reciprocal tariffs with a yawn – even before Trump made his announcement Thursday. Goldman Sachs analysts, in a note to investors this week, said they were skeptical that reciprocal tariffs would do serious damage to the economy, because administrating them would be complex and some foreign countries aren’t exporting stuff Americans want, anyway.

And if enacted, reciprocal tariffs may take the place of Trump’s much more severe and punishing campaign proposal of a 10% across-the-board tariff on all goods coming into the United States.

“While a reciprocal tariff policy poses risks, it is also possible that it could incrementally reduce trade policy uncertainty once announced,” Goldman analysts said.

The lack of a strict deadline also leaves open the possibility that some foreign countries will come to the table to negotiate lower tariffs and Trump will call off some or all of his reciprocal import taxes.

“It’s like everything else: He says something with bombast, and then dials back,” said Michael Block, market strategist at Third Seven Capital. “We fear the worst and then realize it’s all part of the art of the deal.”

Block noted that Trump delayed, at the last minute, tariffs that were scheduled to take effect earlier this month on Canada and Mexico.

Keith Lerner, co-chief investment officer at Truist Wealth, said investors suspect tariffs will once again be used as a bargaining chip and may not be as severe or immediate as feared.

“It’s not like tomorrow we’re going to suddenly have 50% tariffs across the board,” Lerner said.

The flip side of the coin

However, as businesses, consumers and investors embraced the reality that today’s announcement wasn’t nearly as dramatic as suggested by the hype, they also had to wrestle with a separate and equally true reality: Tariffs remain a favorite tool for Trump, and these reciprocal tariffs could, in fact, be enacted someday soon – commerce secretary nominee Howard Lutnick on Thursday suggested they could come in early April.

Yes, Trump postponed 25% tariffs on Mexico and Canada. But he also went through with 10% tariffs on China, adding more tariffs in his first month in office than in his entire previous term.

That reality could be damaging to a US economy that is already struggling to combat rising inflation.

“It’s going to be really hard to fight inflation when we’re putting a big sales tax on our imports,” said Christine McDaniel, senior research fellow at George Mason University’s Mercatus Center, a think tank that studies markets.

Just the threat of tariffs can cause uncertainty that depresses business investment and causes the Federal Reserve to further delay interest rate cuts.

“The Trump administration appears to be moving in a ‘reciprocal’ policy direction despite the significant negative economic consequences for American consumers of across-the-board tariffs on goods coming into the US,” the Tax Foundation said in a blog post Thursday.

Trump has made clear that tariffs remain a key part of his plan to lower inflation, raising revenue to pay for his massive proposed tax cuts. So tariffs may be coming. Their scope just remains unclear. And Thursday’s announcement was a lot of bark with little bite – at least for now.

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