Orange Monday: Will Trump hold his nerve on tariffs?
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The President's sweeping import tariffs have sparked economic uncertainty, with markets crashing and recession fears mounting despite Trump's unwavering confidence in his controversial policy.
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In brief:
- Donald Trump's recent implementation of sweeping tariffs on all imports to the United States has triggered global market crashes, with experts comparing the economic impact to being worse than the 2008 crisis and the pandemic.
- Despite markets plunging worldwide and Goldman Sachs raising the probability of a US recession to 45%, Trump remains steadfast, claiming the US has been "ripped off for decades" and will become "wealthy like never before."
- Prime Minister Keir Starmer has responded by calling for "cool heads," saying he won’t abandon fiscal rules despite the crisis, though The News Agents say his approach is "wishy-washy" and "a diagnosis without much of a prescription."
What’s the story?
“Sometimes, you have to take medicine to fix something.”
To call Donald Trump’s reaction to the markets crashing spectacularly this weekend understated, would itself be an understatement.
The global economy may be looking more in need of a triple heart bypass than some “medicine” to fix the mess it is left facing after the President introduced sweeping tariffs on all imports to the United States last week.
The world over has felt the repercussions of the harsh tariffs, with some saying that it is the biggest blow to the global economy since COVID.
“Forget 2008, forget the pandemic. This is worse than all of that,” Jon Sopel says on The News Agents.
“And it's not an external shock - it's not the bank suddenly imposing a liquidity crisis. It's not a global pandemic. It is one man's action, sitting in the Rose Garden with his big board making an announcement with such devastating effect.”
Asian markets have been hit hard, with stocks plunging in Shanghai, Tokyo and Hong Kong - the latter’s stock exchange down 13% in the worst day of trading since the Asian market crash of 1997.
And the US won’t avoid the operating table. Goldman Sachs has upgraded its probability of a US recession in the next 12 months to 45%, up from a previous estimate of 35%.
The markets are crashing, a global trade war is brewing and a recession is ever more likely - but Donald Trump remains unnerved, telling reporters on Sunday night aboard Air Force One that the United States had been “ripped off for decades” and would be "wealthy like never before" thanks to his radical economic policy.
Orange Monday sees the markets crash following Trump's 'devastating' tariffs
Will Donald Trump hold his nerve?
Donald Trump told Wall Street not to panic as it braced for another sharp fall today (7 April) following the S&P 500’s worst two-day plunge since March 2020 after his tariff announcement.
“Be strong, courageous, and patient, and greatness will be the result.”
The reality was that they plunged on opening this morning (7 April), with the New York Stock Exchange opening to an almost 4% fall.
The question now, is how bad must things get before the President decides to reverse his actions and try to save the US from falling into a recession?
Jon Sopel says the “best case scenario” is that Trump “wrestles some concessions” out of China, the EU, Vietnam and wherever else.
“He’ll announce ‘I have pulled off the greatest victory for the American people ever’ - even though we know it's total bullshit, but it allows him to get off a hook that he has impaled himself on quite deliberately,” he says.
But Emily thinks the best case scenario now isn’t Trump standing down, but the rest of the world standing up, standing together, and saying ‘sod you, we can think differently.”
Because Trump’s tariffs have been “smeared all over the globe,” their power could lie in pulling together, she suggests.
“You've already heard voices like Mark Carney, and Emmanuel Macron giving us a sense of what that world could look like, if you turn around and go, ‘yeah, you're right. The old school way of thinking is over’.
“Trump would be furious if there were any kind of consensus between the countries on the outside ganging up on him. And I think that's the really exciting moment to see what happens next.”
But even if Trump did have an “epiphany” and realise he’s made a huge mistake, Jon argues that the “damage is done”.
“It's not like just everything's going to go back to how it was if Donald Trump climbed down this second. That won't happen. Donald Trump has done things in such a ridiculous way because he wanted this big performative moment when these tariffs would come in.”
Of even more concern, is that even if Trump manages to reverse the damage done, his unpredictable nature leaves businesses and families with no certainty - as he could change his mind back at any moment.
“How can anyone plan with any certainty, whether you are a government, a businessman or a householder. You don’t know what Donald Trump is going to do next, and all you want to do is to have some kind of stability from the leader of the most powerful economy in the world,” Jon says.
How has Keir Starmer responded?
In a speech in the West Midlands today the PM said that "nobody welcomes tariffs" and “the global economic consequences could be profound."
While he said he will be speaking to the US to work out a deal to alleviate the tariffs, he, unsurprisingly, will not be going in all guns blazing, sticking to his; “this is a moment for cool heads" message.
“Keir Starmer and his government seems to be sticking to the course of repeatedly saying we need calm heads and that all options remain on the table,” Lewis Goodall says.
Questioned on whether he will revisit the fiscal rules Chancellor Rachel Reeves set out in the budget, Starmer said that upending the rules isn’t the answer - noting that that they were put in place because Liz Truss “tried an experiment with this country” and the current Labour government is "not prepared to inflict that kind of damage on working people".
He said the reaction to “challenges” Trump’s tariffs bring should not be to put aside our fiscal rules, but to “remind people why we put them in place in the first place, which is to create the certainty that we need."
Although Lewis warns to take his words with caution; “Starmer was asked about whether the government would consider responding to these changing circumstances and changing the fiscal rules, you will note in this answer that he doesn't give a categoric assurance that he won't.”
Starmer’s response to how the UK proceeds in the new world of Trump’s tariffs is “wishy washy,” Lewis says, adding that “He’s tried to chart a middle way between Blairite style globalisation, someone who was completely comfortable with globalisation, and at the same time, to reject the Trump analysis, which is hyper protectionism and tariffs.
“He's saying we still want free trade and we don't want to impose our own tariffs, but at the same time, we want to reject globalisation as we've known it.”
“It ends up being, as often the case with Starmer, a diagnosis without much of a prescription.”
Listen to the latest episode of The News Agents.
