President Donald Trump’s agreement with China to temporarily slash tariffs for 90 days offered the world a bit of welcome relief. But what persists is a sense of uncertainty and the possibility that some damage from the trade war could already be done. The Trump administration agreed after talks this weekend in Switzerland to pare back its 145% in tariffs charged on imports from China to 30%. The Chinese government chose to reduce its retaliatory import taxes on U.S. goods from 125% to 10% while the sides continue to negotiate. Trump declared the de-escalation of the trade war a victory, saying he would soon chat with Chinese President Xi Jinping about how to preserve the financial relationship between the world’s two largest economies. Regardless, the tariffs are now elevated from when Trump took office and the scramble to respond to the White House’s mix of threats and olive branches might leave CEOs, investors and consumers uneasy and unwilling to take risks. Trump is going to keep tariffing The global economy is not going to back to January 19, 2025, the day before Trump became president. Even if he routinely changes the tariff rates, the U.S. president and his aides have made it clear that most imports will be taxed at a minimum of roughly 10%. The 10% figure has been Trump’s baseline. He gave it to most countries for a 90-day negotiating period after his April 2 “Liberation Day” tariff rollout caused a panic in the financial markets. He kept the 10% rate as part of the framework with the United Kingdom announced last week. And Trump’s new 30% tariff on Chinese goods includes 20% tied to China’s role in fentanyl and the 10% baseline applied elsewhere. “We have many deals coming down the line,” Trump said on Friday. “But we always have a baseline of 10%.” But Trump has also hinted that there could be exceptions. Sectoral tariffs of 25% on autos, steel and aluminum are still in place, with Trump stressing that pharmaceutical drugs will also soon face import taxes. Trump said Monday that he told House Speaker Mike Johnson and Senate Majority Leader John Thune to include tariff revenues when looking at how to pay for their planned income tax cuts. Reality can now anchor negotiations Taisu Zhang, a law professor who studies comparative legal and economic history at Yale University, said the chaos from last month probably was not for nothing. Both countries were testing their strengths, with Trump stressing the importance that foreign companies placed on accessing U.S. consumers and China emphasizing its resilience to an external shock. “As recently as February, both sides probably harbored unrealistic assumptions about each other’s economic or political weaknesses or intents,” Zhang said. “The Americans had an exaggerated sense of their own bargaining power to begin with, and the Chinese may have had an exaggerated sense of their security from American economic pressure.” “The best thing to come out of this agreement, therefore, seems to be a stronger sense of reality on both sides,” Zhang said. In that, Zhang said, it looks like the goals of the two countries align, with China consuming more and the U.S. manufacturing more. The stock market loved the news and could shape what happens next The world has seen that Trump remains wary […]