Over the past week, President Trump has been urging to face the financial chaos he has caused and resist his call to rethink his approach.
“I know what I'm doing,” he told Republicans on Tuesday, with the huge tariffs he imposed putting the global market to an end. “Cool!” he said in a social media post Wednesday morning. “Everything will be fine.”
At 9:37 a.m. Wednesday, the president remains bullish on his policy and posted on “Truth Social”: “This is a good time to buy!!!”
But in the end, it was the market that made him turn the course.
According to four people who are directly aware of the president's decision, economic turmoil, especially the rapid rise in government bond yields, caused Trump to blink on Wednesday afternoon and suspend his “countdown” tariffs on most countries over the next 90 days.
Trump told reporters when asked to explain the decision: “Well, I thought people were jumping a little bit. They were getting more and more Yippy, you know, they became a little bit Yippy, a little bit scared.”
Behind the scenes, senior members of Mr. Trump’s team are worried that panic will occur, which may get out of control and potentially damage the economy. Treasury Secretary Scott Bessent and others on the president’s team, including Vice President JD Vance, have been pushing for a more structured approach to trade conflicts that will focus on isolating China as the worst actor, while still conveying a broader message that Mr. Trump’s blow to trade imbalances is severe.
After the reversal on social media, Trump’s team was placed in an enviable position in an attempt to spin the media out, which has been the program, an excellent strategy for the president’s bestseller The Art of Deal. Mr. Bessent even denied that the bond market drove the change.
However, when Mr. Trump came out to explain his decision, he weakened the introduction of Mr. Becent and White House press secretary Karoline Leavitt, and cited the jittery market and said he acted instinctively, more important than anything else. ”
Many of Mr. Trump's senior advisers and officials were unaware of the major shift in this policy until the last minute, as on Wednesday morning, Mr. Trump was still showing that he was sticking to his previous plans.
U.S. Trade Representative Jamieson Greer only knows Mr. Trump’s decision when the House committee defended the original tariffs, a person familiar with the matter said.
Mr. Bessent played an important role in turning the president's pause. However, Mr. Trump's adviser privately admitted that true credibility should go to the bond market. Mr. Trump's decision was due to fear that his tariffs would soon turn into a financial crisis. Unlike the first two crashes in the past 20 years (the 2008 global financial crisis and the 2020 global financial crisis), this crisis will be directly attributed to one person.
Market collapse
Mr. Trump announced his comprehensive tariff plan, and he promised to “make America rich again.”
But the details of the plan and its goals are still foggy. During the tariff announcement last week, Mr. Trump's economic team debated until the last minute about the measures to be taken for tariffs, and according to two people familiar with the plan, Best and Commerce Secretary Mr. Howard Lutnik privately fought for more limited tariffs.
White House trade adviser Peter Navarro, the most aggressive adviser among Mr. Trump’s advisers, insists on a tariff strategy that he claims will revolutionize American manufacturing. The Office of the U.S. Trade Representative has proposed its own formula to calculate tariff rates in other countries based on their tariff rates and estimates of other trade barriers. But two people familiar with the dialogue said the president ultimately decided to adopt a formula based on a trade deficit.
When the tariffs finally came into effect last Wednesday, the market was shaking.
By Sunday, Mr. Bessent decided he needed a private audience for the president. In less than 24 hours, the market will reopen and investors predict it will be “Black Monday”.
Mr. Bessent returned to Washington on Air Force One with Mr. Trump. During the flight, Mr. Best recommended that the president focus on negotiating with other countries, saying Mr. Trump was the most agile negotiator among them, with four briefings on the discussion. But he also stressed that Mr. Trump needs to express his plan’s final game because the market needs more certainty.
The people said Mr. Trump inferred backwards, emphasizing that pain is “short-term.” But Mr. Bessent said that could mean months on the market.
The president obviously only absorbed a portion of the information. On Monday morning, he drafted a truth-clarifying social post that said the “talk” would be conducted with the state. He changed it, saying they would “negotiate”.
By Monday afternoon, he told reporters: “Almost every country wants to negotiate.”
But there is still no consistent expression about the final game: Does the president want to use taxes as a negotiation strategy to cut better deals for the United States? Or is he going to use them as blunt means to raise income and force manufacturing back to the United States?
Find clarity
Although Mr. Trump’s strategy on tariffs is unclear, it is not surprising that he will take active action to impose it on them.
Mr. Trump’s campaign hit a general basic tariff, and his advisers made it clear that the president will follow his intuition after his first term, during which Mr. Trump believes his advisers are trying to keep stopping him.
Mr. Trump took office for the second time and told his adviser that he wanted to do this this time. He is with advisers, who are his instinctive followers who repeatedly say he sees tariffs as a tool to use the U.S. foreign countries to save the economy from decades.
Investors, Wall Street executives and major donors convince themselves that Mr. Trump is either bluffing or stands out from his most radical tariff proposals. Some of his consultants tried. Mr. Lutnik almost immediately advocated exemptions to the automotive industry. Others want to exempt goods that are not produced enough in the United States, such as coffee.
Meanwhile, economists warn that by raising the prices of imported goods, severe tariffs will severely undermine another campaign promise: Mr. Trump will reduce inflation.
But Mr. Trump has a theory about tariffs that have been hardened for 40 years, which has been frozen and resistant to data that conflict with his gut. For years, when he obtained statistics that were not instinctive, he asked people to find alternative information that supported his beliefs.
So he leaned forward even when his consultant found himself struggling to communicate with the public about policies they didn’t fully understand. The aides held several meetings with Mr. Trump and his senior advisers in an attempt to find a way to convince the public that economic penalties are a good idea.
For some time, tariffs have created a vibrant Mr. Trump favorite—the global leader came to him, as he said on Tuesday night, “kiss my ass” looking for a deal. Government officials said more than 75 countries have contacted them.
But the warning signs become too serious to ignore.
Reverse course
On Wednesday morning, Mr. Trump encouraged Americans to buy stocks and urged companies to move to the United States. It is not clear that at that time, after a few hours, he would suddenly change course and put a 90-day pause on many tariffs. Financial markets soared after the reversal, leaving questions about Trump’s previous proposal for buying opportunities, suggesting that some investors may have used to cash in on signals that stock prices have risen sharply.
But shortly after Mr. Trump posted his missionary on social media, he met with Mr. Becente, Mr. Lutnik and Kevin Hassett, director of the National Economic Commission, in the Oval Office. They discussed 10 years of fiscal yields with the president, highlighting concerns about the health of the broader U.S. financial system. Mr. Trump in particular, understanding what rising bond yields mean for banks and their long-term loans is a topic he has intimately understood from the years he has run a real estate company.
Tariffs have triggered a massive sell-off in the U.S. government bond market and the dollar, which investors often see as a safe asset during turbulent times. Wall Street economists have quickly raised their inflation forecasts and lowered growth and had many warnings about recession after Trump announced new tariffs last week. The trillions of dollars in stock market disappeared within a few days.
At 1:18 pm on Wednesday, Mr. Trump announced the truth society that he would back down 90 days of “countdown” tariffs while raising China's tariffs to 125%. In most countries, the 10% tariff rate has been suspended, a version that many people urged Mr. Trump to implement in a few days.
Shortly after Mr. Trump announced the reversal, Mr. Becente and Ms. Levitt were both talking to journalists, both trying to impress the culmination of a well-crafted plan – to isolate China as the culprit because the culprit was the pain caused to American workers.
“It's always his strategy,” Bescent said.
White House Press Secretary Ms Leavitt tried to place the policy rebound in the work of negotiating geniuses.
“Many people in the media obviously missed the 'art of deals', and you obviously didn't see what President Trump is doing here,” she said. You're trying to say that the rest of the world will be closer to China, and in fact, we've seen the opposite effect. The whole world is calling on the United States of America, not China, not China, because they need our market, they need our consumers, they need to talk to them in the Oval Office, which is why more than 75 countries are calling for it. ”
Mr. Trump’s senior adviser Stephen Miller reached another level of transformation on X: “You’ve been focusing on the greatest overall economic strategy in U.S. history.”
Mr. Bessent claimed the 90-day pause was Mr. Trump's idea and insisted that the decision was with trillions of dollars in U.S. wealth being phased out of stock markets after the president's announcement last week.
Asked about the president's decision being driven by a U.S. bond sell-off and whether China is dumping huge holdings in U.S. Treasury bonds.
Mr Bessent said the president was suspending tariffs because the government received a lot of requests to conduct negotiations and each negotiation was “customized” and therefore “spending some time”.
The Treasury Secretary did not directly answer questions about why investors believed this was the last sentence after many changes.
Mr. Trump's actions cover only the next 90 days. As for any additional tariff exemptions, the president refused to give the clarity many investors were looking for.
“Instinctively, more important than anything else. I mean, you can hardly get your pencil on paper. I think it's actually instinct, not anything else,” Trump said when asked Wednesday.
