Facing new warnings from financial markets, business leaders and senior advisers, President Donald Trump this week eased up on two of his frequent targets: Jerome Powell and China.
When Trump took office, he was determined to reshape the global economy. But in the face of turmoil in the stock and bond markets, as well as the pleas of powerful corporate executives who feared that his sweeping tariffs and intervention in the Federal Reserve could trigger an economic disaster, his resolve seemed to waver.
Trump said on Tuesday that despite the Fed’s policies being criticized for days, he has no intention of firing Powell, and he believes that reaching an agreement with Beijing will significantly reduce the comprehensive tariffs he has imposed on Chinese goods. On Wednesday, it was reported that the US is willing to gradually lower tariffs on China over five years. Trump later told reporters that once the negotiations are settled, China “will do very well”.
Trump’s change of attitude eased investors’ concerns, which had triggered a weeks-long sell-off. The S&P 500 index rose 1.7%, but pared back from a previous surge of 3.4%.
However, this shock has highlighted that markets and the economy are more influenced by the US president than ever before – suggesting that more turbulence lies ahead.
Trump made a major U-turn on Tuesday, saying he was willing to “substantially” cut the 145% tariffs imposed on China. According to people familiar with the matter, the president softened his stance a day after meeting with executives from Walmart, Home Depot and Target. The executives said import taxes could disrupt supply chains and push up prices of goods. One of the people familiar with the matter said Trump seemed to be struck by warnings that store shelves could be bare within weeks.
Trump told reporters on Wednesday: “We will reach a fair deal with China.”
Subsequently, Trump also indicated that he might announce the imposition of tariffs on various countries, including China, within the next two to three weeks. At the same time, Trump stated that the final deadline would depend on whether China participates.
“It depends on them,” Trump said. “The situation we have now is that we have a very, very great place. It’s called the United States of America, but it has been exploited for many years.”
The Wall Street Journal reported on Wednesday that U.S. government officials are considering a plan to cut tariffs on Chinese imports. According to the proposal, tariffs would be imposed in phases, with 35% tariffs on non-national security critical goods and 100% tariffs on national security critical goods. The plan would be implemented over five years, eventually reducing the tariff rate to 50% to 65%.
It is well known that Trump is prone to changing his mind and his stance could shift again. A White House official said that the proposals in the reports – which might be aimed at luring China back to the negotiating table – would not be implemented if no action was taken in the negotiations.
U.S. Treasury Secretary Scott Bessent also expressed the same cautious attitude on Wednesday, saying that the United States does not plan to unilaterally lower tariffs and that it may take two to three years to reach a comprehensive trade agreement. His remarks led to a pullback in earlier gains in the stock market.
White House Press Secretary Caroline Levitt said on Fox News later Wednesday: “We will not unilaterally lower tariffs on China. The president has made it clear that China needs to reach an agreement with the United States, and we are confident about that.”
When asked who the president consults on tariffs and trade policy, Bessonet said that Trump “constantly seeks the advice of business leaders” and mentioned the visits of major retailers, adding that “the three major German car companies also visited on Friday.”
The White House has not yet officially launched tariff negotiations with the Chinese government, but when asked if it was actively engaging with China, Trump said, “Everything is moving forward positively.”
Trump said on Wednesday: “We will make money with everyone, and everyone will be happy. We will no longer be a country exploited by all the countries in the world.”
At the urging of senior advisers and allies, Trump has been striving to turn negotiations with China into reality, which is in line with his public support for Powell.
