Why Trump blinked on tariffs

After a week of intensifying market turmoil, President Donald Trump stepped back from the brink of financial crisis Wednesday, announcing a 90-day “pause” on the exorbitant tariff levels he’d imposed on dozens of countries.

It was not a total climbdown: Trump intensified a trade war with China by hiking its tariff level up to 125 percent. And he is also keeping in place a 10 percent tariff for other countries. (Details on exactly which countries remained murky as of mid-Wednesday afternoon.)

But it was a significant step back.

So why did he do it? Why make such a dramatic announcement last week, and walk it back so relatively soon?

Though Treasury Secretary Scott Bessent initially claimed this pivot was part of Trump’s “strategy all along,” many outside observers saw this as market-driven, both because of the timing and because of remarks Trump himself later made (he said he shifted because people were “getting yippy” and “a little bit afraid”).

Since Trump’s “Liberation Day” announcement last week, stocks had lost 10 percent of their value. Even more concerning: US treasury bond yields were spiking. Trump’s team had been trying to drive bond yields lower, both so the US government would pay less interest on its debt and so the Federal Reserve would cut rates and lower borrowing costs for Americans.

Instead, yields went up, in ways that some feared could ripple outward and cause a financial crisis. This wasn’t what the Trump team had expected, so many speculated it was the reason for Trump’s sudden cave. (“The bond market is very tricky,” Trump said Wednesday afternoon. “Last night, people were getting a little queasy.”)

Investors were overjoyed at Trump’s partial walkback, as stocks quickly surged — though not all the way back to their pre-Liberation Day levels (they made up about half of their losses since then).

This relief may be largely about the seeming confirmation that, contrary to appearances of the past week, Trump is not totally heedless to market reaction and lobbying, disconnected from reality, and willing to wreck the business environment. The shift also suggests that Wall Street-aligned advisers like Bessent have gained the upper hand over anti-trade fanatics like Trump adviser Peter Navarro — for now, at least.

But there will likely be more tumult ahead. Trump’s trade war with China is still on. And though Trump’s team purportedly intends to work out deals with every other country he targeted, it is far from clear how such deals could realistically meet Trump’s (bizarre) goal of bringing the US into trade surplus with every major trading partner.

Furthermore, the chaos and uncertainty Trump caused may have a lasting effect, chilling businesses’ planning and doing damage to the economy. Because if he caused such a mess once, how do we know he won’t do it again?