Why has Donald Trump held fire on tariffs?
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Subscribe to enjoy similar stories. Donald Trump started his new presidential term with an unexpected show of restraint. Just a couple of months ago, Mr Trump had warned that he would announce hefty new levies on his first day back in the White House.
Instead, he opted for a softer opening. He was set to issue a presidential memorandum, calling for an “America first" trade policy and a review of commercial relationships with China, Canada and Mexico. His measured start prompted relief in government offices and on trading floors around the world.
Foreign currencies and stocks rallied. How long will Mr Trump’s restraint last? In his inaugural address he vowed to follow through on his pledge to jack up tariffs, a staple of his campaign. “Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens," he said—a line that his supporters may love but which distorts the grimmer reality of how tariffs function in part as a tax on Americans.
He also said the government would establish an External Revenue Service to collect the “massive amounts of money" that will pour into America from its tariffs. Mr Trump’s initial caution may be explained by the fact that he uses the stockmarket as a barometer of economic sentiment, and may have wanted to avoid rattling investors at the outset of his presidency. Although American markets were closed for Martin Luther King Day on January 20th, futures jumped after initial reports about the absence of new tariffs, pointing to a strong opening on the 21st.
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