Trump's tariff strategy: A tough sell or tactical maneuver?

President Donald Trump’s approach to tariffs has consistently been a point of contention among investors, business leaders, and political analysts. His latest move, branding April 2 as "Liberation Day"—a day set for sweeping tariffs against America’s trading partners—has generated both concern and intrigue. However, his recent rhetoric suggests a calculated effort to temper expectations, a strategy that has been a recurring theme in his tariff policies.

Trump’s history with tariffs reveals a pattern: announce severe measures, then soften the blow. This tactic was evident again on Monday when he reassured the public that, while April 2 would be significant, it may not be as severe as initially anticipated. Investors took note, reacting positively to the possibility of tariff carve-outs and delays.

“There definitely has to be a marketing component to this, as the logic behind increased tariffs is not obvious,” said Colin Grabow, associate director at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies. This suggests that Trump’s approach may be less about implementing drastic tariffs and more about maintaining leverage while keeping markets from panicking.

On Monday, Trump strategically shifted the conversation. Rather than focusing on the immediate economic impact of tariffs, he highlighted potential delays and adjustments. Auto tariffs? Coming “very shortly.” Pharmaceutical tariffs? “At some point.” Semiconductor and lumber tariffs? “Down the road.” While initially pledging sweeping reciprocal tariffs, he hinted at possible exemptions, stating, “I may give a lot of countries breaks.”

This wouldn’t be the first time Trump has backed off from his hardline stance. After his reelection, he initially vowed to impose a 25% tariff on all products from Mexico and Canada on January 20. That deadline was pushed back twice, ultimately resulting in selective tariffs based on compliance with the USMCA trade agreement—a detail that largely went unnoticed.

Trump’s tariff threats have consistently stirred market volatility. Investors, CEOs, and economists have long worried that broad-based tariffs could disrupt supply chains and increase consumer costs. While tariffs on China remain at 20%—with an additional 25% on steel and aluminum—his administration has refrained from enacting the extreme 60% tariffs he once proposed.

Mexico, China, and Canada collectively accounted for 41% of U.S. imports in 2024, making them critical trading partners. Given this, businesses fear a full-blown trade war that could elevate production costs. However, by tempering his tariff plans, Trump has managed to avoid worst-case scenarios while still maintaining his tough-on-trade image.

One area where Trump remains firm is reciprocal tariffs—charging other nations equivalent import taxes to what they impose on U.S. goods. This concept, framed as a matter of fairness, is easier to sell to the American public than complex sector-specific tariffs.

“We’ve been ripped off by every country in the world,” Trump asserted during a recent Cabinet meeting. This messaging resonates with many Americans who view trade imbalances as a disadvantage. Additionally, reciprocal tariffs can be positioned as a way to reduce global trade barriers rather than simply imposing punitive measures.

Trump’s approach follows a predictable playbook: threaten extreme measures, then walk them back just enough to ease concerns. While his final tariffs may not be as draconian as initially feared, they still carry significant consequences. For instance, the 20% tariffs on Chinese goods continue to challenge businesses reliant on imports, with potential ripple effects for consumers.

Consumer sentiment has already taken a hit. The Conference Board reported that consumer confidence dropped to its lowest level since January 2021, with concerns over tariffs playing a significant role. Yet, despite economic data pointing to potential downsides, Trump appears unwavering in his commitment to tariffs.

“As a self-described ‘tariff man’ who has long seemed enamored with import duties, we should assume that Trump’s desire for higher tariffs is sincere and more than just a negotiating ploy,” Grabow noted. However, fine-tuning the messaging to maintain public and investor confidence remains an ongoing challenge.

While Trump’s tariff strategy continues to evolve, one thing is clear: he is adept at managing expectations. Whether his approach will ultimately benefit the economy or strain trade relations remains to be seen. What is certain is that tariffs will remain a defining feature of his administration’s economic policy, with both risks and rewards unfolding in real-time.