Was it Jamie Dimon or the bond market?
Donald Trump played chicken with the markets for a week. But by Wednesday the multi-front trade war he launched on the world on April 2 with much fanfare had become unsustainable economically, financially and politically for the US president.
In an abrupt move, Trump swerved away from the steepest US tariffs he had set on US trading partners — with the exception of China — declaring a 90-day pause in the levies to give markets time to breathe and leave room for negotiations.
The U-turn represented a sobering setback for a president who said he was “liberating” Americans from what he claimed was an unfair global trade system that, he suggested, he alone had the courage to reorder.
His decision to cave, at least partially, is a sign that Trump is still susceptible to a backlash from investors, lawmakers and donors — even on one of his signature policy promises.
Trump said he had been thinking about the pause for “the last few days”, with the move coming together “early [Wednesday] morning”.
He reversed the tariffs because people were “getting . . . a little bit afraid”, he said. “I thought that people were jumping a little bit out of line. They were getting yippie.”
In the end, the pause “was written from the heart”, he added.
“I think that this has proven that he pays attention to markets and that he realises when he’s gone too far. I think that’s a plus for the guardrails: the market still has power and can’t be intimidated,” said Dec Mullarkey, head of SLC, an asset manager.
Until Sunday, even after two brutal sell-offs in US equity markets, Trump had vowed to keep his hard line. The president spent much of the weekend in Florida playing golf and set a very high bar for talks with alarmed trading partners. He brushed off the market turmoil as a blip.
But the strains were starting to show.
Capitol Hill Republicans who back Trump on nearly everything were suddenly voicing criticism. Democrats who had struggled to find an effective line of attack marvelled at the political gift Trump had delivered with a trade war that would hurt voters across the US.
The revolt against Trump’s ultra-protectionism from investors and some of his wealthy backers in US business, including Elon Musk, the technology billionaire and a top White House adviser, gathered steam.
By Monday, Trump was beginning to adjust. He launched trade talks with Japan and South Korea and put Treasury secretary Scott Bessent, considered on Wall Street to be the most credible of the president’s lieutenants, in charge of negotiations with trading partners.
The aggressive trade sceptic Peter Navarro, who wrote a Financial Times opinion piece warning trading partners that Trump was not negotiating — just as Bessent said he was doing exactly that — appeared to shed some influence.
Trump said that as he weighed the pause, he talked it through with Bessent and Lutnick, not mentioning Navarro.
But it was not until the market crisis extended to a sell-off in US government debt this week, prompting economists such as former Treasury secretary Lawrence Summers to warn of a financial crisis, that Trump truly buckled, pausing most of the extra “liberation day” tariffs.
“Trump is fine with Wall Street taking a hit but he doesn’t want the whole house to come down,” said one person close to the White House.
A man whose business career as a property developer was characterised by deploying debt saw the warnings signs in the US bond market.
“The bond market is very tricky, I was watching it . . . people were getting a little queasy,” Trump said as he explained his shift on Wednesday.
He also said he had been persuaded by an interview that JPMorgan’s chief executive, Dimon, did on Fox Business, where he warned that the US was probably heading into a recession.
“I’m taking a calm view, but I think it could get worse if we don’t make some progress here,” Dimon said.
White House officials sought to portray Trump’s colossal shift as part of a grand plan.
Speaking outside the White House on Wednesday afternoon, Bessent said he had spent part of Sunday with Trump in Florida and described the events of the past week as reflecting the president’s “strategy all along”.
“It has brought more than 75 countries forward to negotiate. It took great courage, great courage for him to stay the course until this moment, and it ended up here,” Bessent said, adding that America would now be engaged in “good faith” talks. “We are willing to hear you.”
Days earlier, Bessent had hailed Trump’s tariff plans in an interview with Tucker Carlson, suggesting they would help the US make the global marketplace fairer, reindustrialise and address “massive distributional problems” in its economy.
But one Wall Street executive close to the White House said Bessent had helped Trump come to the conclusion that the US should pause the tariff increase on countries with historically good ties with the US and restrict its harshest punishment to Beijing.
Business groups were relieved but said the convulsions around the path of Trump’s policies had not been lifted. The 10 per cent tariffs on most countries remained in place, they pointed out, the US had escalated its trade war with China, the world’s second-largest economy, and potential levies on specific sectors such as cars and pharmaceuticals remained unclear.
“While this temporary pause may lessen the immediate pain, it doesn’t diminish the uncertainty that is paralysing companies’ trade, sourcing and investment calculations,” said Jake Colvin, president of the National Foreign Trade Council, a lobbying group in Washington.
“We encourage the administration to continue to de-escalate and identify durable paths forward to eliminate these duties, rebuild trust and minimise future uncertainty with our economic partners,” he added.
Democrats continued to pound the president, despite his rollback.
“The chaos, uncertainty, and real damage of the Trump Tariff Tax will not disappear in 90 days. Bottom line: the President has created a global mess at the expense of American families and businesses,” Dick Durbin, the Illinois senator, said in a statement.
Additional reporting by Will Schmitt in New York
