Trump tariffs: Why big business found Trump’s first-day orders reassuring

Donald Trump has never been on better terms with corporate America. Yet his apparent trade agenda has never been more at odds with the interests of big business.

In recent weeks have tech billionaires who had once projected ambivalence (if not hostility) toward Trump — including Jeff Bezos, Mark Zuckerberg and Bill Gates — have paid him their respects at Mar-a-Lago. The world’s richest entrepreneur, Elon Musk, has become the new the president’s right hand. And Trump’s pick for Treasury Secretary, hedge fund manager Scott Bessent, won great applause within the financial industry.

Although Trump has cozyed up to Big Tech and Wall Street, he has promised to enact trade policies that would undermine both, along with countless other American industries.

On the campaign trail, Trump promised to slap a tariff of between 10 percent and 20 percent on all imports into the United States, along with a 60 percent tariff on Chinese goods and a 25 percent import surcharge on Canadian and Mexican goods — at least until our neighbors choke the flow of all migrants and drugs across the northern and southern borders of the United States.

This protectionist agenda is far more radical than anything Trump attempted in his first term. It threatens to hamper American tech companies by increase the cost of semiconductorslower stock valuations with reduce economic growth and fuel a global trade warand disrupt the American auto industrywhose supply chains were built around the presumption of duty-free trade with Mexico.

Thus, American investors, executives and entrepreneurs watched Trump’s first day in office with bated breath: Would his inaugural address and initial orders prioritize the economic interest of American companies in relatively free global exchange – or his own ideological fixation on trade deficits?

Trump’s Day 1 actions did not fully clarify his priorities on this front. In his opening speechthe president reiterated his broad commitment to protectionism. Meanwhile, his administration ready to launch federal investigations into the US trade deficit in general, as well as the trade practices of China, Mexico and Canada in particular.

Nevertheless, Trump did not actually institute any new tariffs on his first day in office, as his administration’s arch-protectionists had hoped he would.

Investors interpreted Trump’s caution as a sign that he would listen the push of his advisers for a more limited and graduated tariff policy; stocks rose Monday, while the US dollar fell (stiff tariffs would increase the value of America’s currency).

Wall Street’s relief may be premature. Trump appears as ideologically disturbed by America’s trade deficit as ever. And on Monday night, Trump said his administration was thinking about adoption of 25 percent tariffs about Canada and Mexico about “I think February 1.” Still, given that his remarks about impending tariffs were made off the cuff, in response to a reporter’s question, and that Trump has a history of falsely predicting that he will fulfill various campaign promises in approximately two weeksit is unclear whether he was referring to an actual plan that the administration had underway.

How he intends to balance his protectionist instincts against his desire for a booming stock market and shivering billionaire class remains uncertain. Trump’s impending trade memorandum does not end his administration’s infighting over trade policy, but merely prolongs it.

Why Wall Street took comfort in Trump’s Day 1 trade actions

In recent weeks, arch-nationalists in Trump’s inner circle — including his longtime immigration adviser Stephen Miller — had pushed for Trump to immediately declare a national emergency on trade, according to The Wall Street Journal.

This would theoretically give Trump broad authority to quickly impose steep tariffs.

(Although some of them legal mechanisms (to approve tariffs requires either an investigation or comment period, the International Emergency Economic Powers Act of 1977 would no doubt give Trump a legal basis to dispense with such procedural treats when he declared said emergency.)

But on Day 1, the president declined to take that approach.

Trump put his commitment to protectionism at the forefront of his inaugural address, pledging to “immediately begin the overhaul of our trading system to protect American workers and families.” He promised to “tariff and tax foreign countries to enrich our citizens” and establish an external tax service to collect those taxes from foreign entities (Trump’s argument for establishing a new agency to perform a function already fulfilled by US Customs and Border Protection is unclear) . The president even dedicated several sections of his speech to praising President William McKinley, a champion of extremely high tariffs.

Nevertheless, it is not hard to see why investors responded positively to Trump’s actions. The president initially kept his protectionist promises abstract. While his promises on other policy fronts were more concrete — for example, he promised to roll back Joe Biden’s emissions restrictions on new vehicles and designate international drug cartels as foreign terrorist organizations — he did not formally reiterate his commitment to a universal tariff.

Instead, Trump’s advisers told journalists Monday that he would issue a broad memorandum directing federal agencies to investigate — and propose solutions to — the U.S. trade deficit, as well as the alleged abusive trade practices in China, Mexico and Canada.

The fact that Trump declined to take a more drastic immediate step may indicate that the business wing of the Trump White House is trying at least some influence on trade policy. Earlier this month, the Washington Post reported that Trump aides were considering a proposal to narrow Trump’s universal tariff plansuch that it would only apply to sectors deemed essential to US national or economic security. Trump’s initial reticence on trade lends credence to such reports of his administration’s scaled-down ambitions.

Of course, Trump’s threat to impose 25 percent tariffs on Canada and Mexico on Monday night calls that restraint into question. And futures markets initially declined in response to Trump’s remarks. Yet the president has long been explicit that his pledge to impose huge duties on America’s top trading partners is a ploy to secure concessions on border enforcement from our nation’s neighbors. It is therefore possible to interpret his repetition of this threat as an act of setup.

Trump has strong incentives to moderate trade

It’s entirely possible that Trump’s caution on trade will actually end on February 1st, if not sooner. But there are at least three reasons to believe Trump will reward Wall Street’s early optimism and abandon his most radical trade policies. First, these policies would benefit virtually no major interest group within the Trump coalition. Second, Trump has historically been obsessed with the performance of the stock market on his watch. And third, he has recently shown a willingness to subordinate hardline nationalism to the economic needs of Big Tech.

Imposing even a 10 percent tariff on all imported goods would not only harm various business interests but would also likely increase costs for consumers. Such a duty would thus harm both Trump’s donors and voters.

If Trump’s first term in office is any guide, his universal tariff would not even be scaled back to benefit American manufacturers, who would be vulnerable to higher costs and retaliatory tariffs from foreign nations. In general, presidents seek to avoid enacting policies that harm the majority of their coalition, benefiting a narrow group of ideologues. And that is what the implementation of Trump’s grandest visions for trade policy is likely to entail.

Second, the introduction of a universal tariff would disrupt stock markets. During Trump’s first term in office, he supervised obsessing over the markets’ performance, tweeted about it incessantly, suggesting stock values ​​were a barometer of sound policy, and warned in 2018, “If the Democrats take over Congress, the stock market will plummet.”

Finally, Trump has recently shown some sensitivity to the interests of his newfound friends in technology, even when those interests conflict with the principles of right-wing nationalism. Over the holidays, Elon Musk argued with fellow partisans about the desirability of high-skill immigration and the H-1B visa, which helps American tech companies hire foreign talent. Trump ultimately expressed support for Musk’s position.

Trump really believes in protectionism

All that said, to the extent that Trump has any deep-seated political beliefs, the notion that free trade hurts America is one of them. Trump has been advocates massive duties on foreign goods since at least 1988, when he called for a 15-20 percent tariff on imports from Japan.

Unable to seek a third term, Trump faces no binding political constraints. According to New York Times, Trump feels he has a “mandate” to implement his ideological vision and “sees himself as his own best adviser.”

When the Washington Post reported that Trump’s aides dropped his universal tariff plan earlier this month, he suddenly became declared on Truth Social, “Washington Post story, citing so-called anonymous sources that don’t exist, incorrectly says my tariff policy will be scaled back. That’s wrong.”

Trump struck a similar tone Monday night. And his memorandum could well serve as a prelude to all of his signature trade proposals that establish a more robust legal basis for imposing a universal tariff and punitive tariffs on America’s top trading partners.

By endorsing Trump, many in corporate America were betting on his prudence and loyalty. As Monday showed, that’s not the safest bet.