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

Written by: Alex Xu, Mint Ventures

Last week, at 4 PM Eastern Time on April 2nd (after the US stock market closed), Trump announced his "reciprocal tariff" plan.

He divided the trade surplus with the U.S. of his main trading partner last year by its total merchandise exports, and then divided by two, to arrive at the new "equivalent" tariff rate.

Where is the logic? It doesn't matter.

They just need an excuse to start a war.

Subsequently, global markets, including crypto assets, fell into a bloodbath.

The current confusion of the market's expectations for Trump's tariff plan is: Is the tariff a long-term national policy of the Trump team, or is it a negotiation strategy used to seek benefits from the negotiators (trading partners, large enterprises)?

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

But if it is the latter, then perhaps the moment when the so-called "equivalent tariffs" were announced on April 2nd marks the peak of the fear in this round of trade war. The subsequent major developments will still depend on the progress of negotiations among multiple parties, gradually reaching a consensus between the United States and bilateral or multilateral partners, leading to a gradual alleviation of market panic and asset prices returning to their proper levels.

Although Trump previously touted tariffs as a form of "national policy" during his campaign and after taking office, using tariffs to compel the return of manufacturing was also a political commitment to the Rust Belt and lower-income voters, and his stance was exceptionally resolute.

However, I still tend to think that tariffs are just his bargaining chips, and the ultimate goal of his negotiations is to achieve enough political achievements for himself, which may include:

• More overseas orders: Other countries are purchasing more American goods (food, energy, weapons, passenger planes)

• More local job opportunities: Large companies invest in building factories in the United States (TSMC)

• Reasonable encirclement of competitors: Forcing countries attempting to sit on the fence to unite with them, further encircling China (Vietnam and South Korea have announced high tariffs on steel exports to China today).

In addition, the asset crash and recession expectations caused by tariff disruptions have also put immense pressure on the immovable Powell. Trump cannot use executive power to force the Federal Reserve to cut interest rates, so what about the economy and stock market on the brink of collapse?

Therefore, as long as he and his group can withstand the current immense pressure, when seemingly illogical tariff demands gradually translate into results during negotiations, his reputation will gradually turn around.

These results will translate into the energy to further strengthen its political influence, justify further power expansion, and help the Republican Party gain an advantage in next year's midterm elections.

Is it possible that Trump really regards tariffs as a long-term national strategy, believing that tariffs can force the return of manufacturing, transform the current hollowing out of American manufacturing, and provide more job opportunities?

But the problem is that currently both space and time do not allow it. Next year will see the midterm elections for both houses, and the economic recession, stock market crash, and asset inflation caused by long-term high tariffs will inevitably lead to the Republican Party losing its currently slight advantage in the House of Representatives (and even the Senate), making Trump a "lame duck president" in the remaining two years of his term, making it even harder to push through policies.

There is currently not enough time and space for him to implement such long-term national policies. By next year, when the stock market fails and the tokens fail, he won't be able to hold on, let alone long-term policies.

So this possibility is still relatively small.

In fact, from the current perspective, less than a week after the introduction of reciprocal tariffs, following contacts with multiple countries, and after confirming the actual negotiation interests, the Trump team has already started to soften its stance on tariffs.

For example, today, Kevin Hassett, the Chairman of the U.S. National Economic Council, stated: "Currently, more than 50 countries have contacted the White House to begin trade negotiations. President Trump is not trying to destroy the market by destroying the U.S. market."

Immediately after, U.S. trade advisor Navarro spoke up: Trump seeks to reduce tariffs and non-tariff barriers. This guy is a major supporter of tariff policies within Trump's camp and has recently been fiercely criticizing Musk's free trade stance.

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

It is also possible.

For example, negotiations between the United States and the most important trade partners have not gone smoothly, especially with the European Union and China. Currently, both have either already implemented countermeasures or have threatened to do so if negotiations fail (April 13), while Treasury Secretary Becerra warned on the same day the "reciprocal tariffs" were announced: do not retaliate, otherwise the U.S. will escalate.

This situation could lead to a stalemate in negotiations and even a short-term escalation of conflicts (further mutual tariff increases), but considering that most other countries will actively negotiate with the United States, the likelihood of the overall situation being much worse than it is now is relatively low.

After all, Trump's core task is still to achieve more "political accomplishments" before next year's midterm elections, rather than allowing high inflation and a collapsing stock market to ruin the latter half of his term.

Therefore, going "crazy" a little earlier and negotiating earlier is more advantageous for Trump.

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