Long-term national policy or negotiation tactic? How to understand Trump's "crazy tariffs"?

By Alex Xu , Mint Ventures

Last week at 4 p.m. Eastern Time on April 2 (after the U.S. stock market closed), Trump announced his "reciprocal tariff" plan.

He took the major trading partners’ physical trade surplus with the United States last year, divided it by its total merchandise exports, and then divided that by two to arrive at the new “reciprocal” tariff rate.

Where's the logic? It doesn't matter.

All they need is an excuse to start a war.

Subsequently, global markets, including crypto assets, fell into a bloody storm.

The current confusion in the market regarding Trump’s tariff plan is: Is the imposition of tariffs a long-term national policy of the Trump team, or is it a negotiation strategy used by it to gain benefits from its negotiating partners (trading partners, large companies)?

If it is the former, then perhaps it is true as many people say that this will change the global trade situation. The United States is moving towards isolationism, which is obviously detrimental to the global economy in the long run.

But if it is the latter, then perhaps the moment the so-called "reciprocal tariffs" were issued on April 2 was the peak of fear in this round of trade war. The subsequent major development direction will still be that as the negotiations of multiple parties progress, the United States and bilateral and multilateral consensus will gradually be reached, market panic will gradually subside, and asset prices will return to the level they should be.

Although Trump has promoted tariffs as a "national policy" when talking about them during his campaign and after taking office, forcing manufacturing to return through tariffs is also a political commitment to the Rust Belt and grassroots voters, and his attitude is extremely firm.

However, I still tend to believe that tariffs are just his bargaining chips, and his ultimate goal in negotiations is to gain enough political achievements for himself, which may include:

• More overseas orders: other countries purchase more U.S. goods (food, energy, weapons, passenger planes)

• More local job opportunities: Large companies come to the United States to invest and build factories (TSMC)

• Reasonable suppression of competitors: forcing countries that attempt to sit on the fence to unite with them to further suppress China (today, Vietnam and South Korea have announced that they will impose high tariffs on China's steel exports)

In addition, the asset plunge and recession expectations caused by tariff disturbances have also put tremendous pressure on Powell, who cannot command. Trump cannot use administrative power to force the Federal Reserve to cut interest rates. What about the economy and stock market that are on the verge of collapse?

Therefore, as long as he and his group can withstand the current tremendous pressure, and when the seemingly illogical tariff demands are gradually transformed into results in the negotiations, his reputation will gradually turn around.

These achievements will be transformed into energy to further enhance its political influence, become a reason for further expanding its power, and help the Republican Party gain an advantage in next year's midterm elections.

So is there a possibility that Trump really regards tariffs as a long-term national policy and believes that tariffs can force the manufacturing industry to return, transform the current hollowing out of the U.S. manufacturing industry, and provide more jobs?

But the problem is that there is no space or time for this. The mid-term elections for both houses will be held next year. The economic recession, stock market crash, and asset inflation caused by long-term high tariffs will definitely cause the Republicans to lose the House of Representatives (and even the Senate), where they currently have a slim advantage, making Trump a "lame duck president" in the remaining two years of his term, making it even more difficult to implement policies.

At present, there is not enough time and space for him to implement such a long-term national policy. When the stock market and the token are not doing well next year, he will not be able to hold on to the short-term policy, let alone the long-term national policy.

So this possibility is still relatively small.

In fact, from the current perspective, less than a week after the introduction of reciprocal tariffs, with contacts with many countries and after the actual negotiation interests have been confirmed, the Trump team has begun to soften its tone on tariffs.

For example, today, Kevin Hassett, director of the National Economic Council of the United States, said: "More than 50 countries have contacted the White House to start trade negotiations. President Trump is not trying to destroy the market by destroying the American market."

Soon after, US trade adviser Navarro said that Trump is seeking to reduce tariffs and non-tariff barriers. Navarro is a major supporter of tariff policy in Trump's camp, and he has recently criticized Musk's free trade stance.

So, will there be any unexpected situations in this process?

It's possible.

For example, the United States has not been able to negotiate with the most important trade leaders, especially the European Union and China. At present, the two countries have either implemented countermeasures or threatened to implement countermeasures if the negotiations fail (April 13), and Finance Minister Bessant warned on the day of the announcement of the "reciprocal tariffs": Do not retaliate, otherwise the United States will increase the tariff.

This situation may lead to a stalemate in negotiations or even a short-term escalation of conflict (further raising tariffs on each other), but considering that most other countries will actively negotiate with the United States, the overall situation is unlikely to be worse than it is now.

After all, Trump’s core task is still to win more “political achievements” before next year’s midterm elections, rather than letting high inflation and collapsing stock markets ruin the second half of his term.

Therefore, it would be more beneficial for Trump to "go crazy" earlier and start negotiations earlier.

As the creator of "uncertainty", Trump also does not want to face "uncertainty" before next year's midterm elections.