What is President Trump’s Tariff Game Plan?

For the second weekend in a row, watching a Sunday television news program I saw a top White House official say April 2 is the day to watch.

Last Sunday, Commerce Secretary Howard Lutnick mentioned April 2 multiple times, the day reciprocal tariffs are set to go into effect, as the key date.

This Sunday it was Treasury Secretary Scott Bessent’s time to highlight April 2 as the game changer. He went one step further by saying that the full extent of the policy change might not be felt until early June. He said it was not a matter of free trade but fair trade.

If the U.S. raises its tariffs to match the higher tariffs elsewhere, other countries have the following choices:

1) Lower tariffs on U.S. goods so the it will lower its reciprocal tariffs. ,

2) Keep their tariffs at the same level, presumably to protect domestic industries, and face higher prices for selling its products into the U.S.

3) Absorb the higher duties imposed by the U.S. by lowering its export selling price.

4) Retaliate by raising the tariffs on the same, similar or other imports from the U.S., which would risk touching off a trade war.

What is President Trump’s Tariff Game Plan?

The White House reciprocal tariff game plan

The White House bet is that most countries will look to lower their tariffs on imports of U.S. goods to avoid facing higher tariffs on exports to the U.S.

The theory makes sense from a pure fair trade point of view..

However. theory does not always translate into reality. There is always the risk of unintended consequences.

Take a recent trade war salvo where President Trump threatened to levy a 200% tariff on EU wine. Champagne and other alcohol products in retaliation with plans to impose a 50% tariff on U.S, whiskey, The EU threat was in response to the hike in U.S. steel and aluminum imports.

Wartch April 2

So., you can see how actions on tariffs can escalate into a trade war. The White House bet is that its actions on reciprocal tariffs will result in generally lower duties that will open markets for U.S. exports.

In the meantime, there will likely be more Trump tariff headlines. However, you can ignore the threats as it will not be until April 2 (and later) that we will find out whether the U.S. bet on reciprocal tariffs will work out, result in retaliation or something in between.

How this plays out will influence stocks (risk on/risk off), fears of recession, central bank monetary policy and general consumer and investor sentiment.

Whatever the case, markets crave certainty and will see if April 2 provides some in an environment dominated by uncertainty.