WASHINGTON – Last week, President Donald Trump has asked to calm down the financial chaos he himself created and resisted to appeals to rethink his approach. “I know what I’m doing,” he told Republicans on Tuesday, while the massive tariffs he imposed play the global markets in turbulence. “REST ASSURED!” He wrote in a social networking post on Wednesday morning. “Everything will work out.”
At 9:37 on Wednesday, the president was still confident in his politics, posting on the Social Truth: “This is a great time to buy !!!” But in the end, it was the markets that made him change their minds. The economic turmoil, particularly a rapid increase in government bond income, made Trump back back on Wednesday afternoon and pause their “reciprocal” fares for most countries for the next 90 days, according to four people with direct knowledge of the president’s decision.
Asked the decision, Trump told reporters, “Well, I thought people were leaving the line a little. They were getting nervous, you know, they were getting a little nervous, a little scared.” Behind the scenes, senior members of the Trump team feared financial panic that could get out of control and potentially devastate the economy. Treasury Secretary Scott Bessent and other members of the president’s team, including Vice President JD Vance, had been pushing for a more structured approach to commercial conflict that focused on isolating China as the worst actor, while still broadcasting a broader message that Trump was serious about fighting commercial imbalances.
After its turnaround on social networks, Trump’s team was placed in the uncomfortable position to try to convince the media that this was part of the plan from the beginning, a brilliant strategy taken directly from the pages of the president’s best -selling book, “The Art of Negotiation.” Bessent even denied that the title market had driven the change. When Trump came to explain his decision on Wednesday, however, he contradicted both Bessent and Karoline Leavitt, the White House press secretary, citing the nervous market and saying that it was acting “instinctively, more than anything else.”
Bessent played a significant role in directing the president to the break. But the real credit, admit Trump’s advisers in private, should go to title markets. Trump’s decision was motivated by the fear that his bet on tariffs could quickly turn into a financial crisis. And unlike the two previous crises of the last 20 years – the global financial crisis of 2008 and the 2020 pandemic – this crisis would be directly attributable to only one man.
Market collapse
On the day Trump announced his comprehensive tariff plan, he promised to “make America rich again.” But the details of the plan and its goals remained harsh. In preparation for the announcement of tariffs last week, Trump’s economic team debated until the last minute about how the tariffs should take, with Bessent and the Secretary of Commerce Howard Lutnick arguing privately for more limited rates, according to two people familiar with the plans.
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Peter Navarro, the White House commercial advisor, was the most aggressive of Trump’s advisers, insisting on a tariff strategy that he claimed to create a revolution in American manufacturing. The US Commercial Representative’s office has elaborated its own formula for calculating tariff rates for other countries, based on their rates plus an estimate of other commercial barriers. But the president decided, in the end, to continue with a formula based on the commercial deficit, said two people familiar with the conversations.
When the tariffs were finally announced last Wednesday, the markets plummeted. On Sunday, Bessent decided that he needed a private audience with the president. In less than 24 hours, markets would reopen and investors were predicting a black Monday. ” Bessent traveled with Trump back to Washington at Air Force One. During the flight, Bessenta advised the president to focus on negotiating with other countries, saying that Trump is the most skilled negotiator, according to four people informed about the discussion.
But he also emphasized that Trump needed to articulate the ultimate goal of his plan because the markets needed more certainty. Trump resisted, people said, emphasizing that the pain was “short -term,” said one of the people. But Bessent said this could mean many months in terms of the market.
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Seeking clarity
Investors, executives of Wall Street and great donors convinced that Trump was bluffing or would be dissuaded from his most aggressive tariff proposals. Some of his advisers tried. Lutnick argued for exemptions to the automotive industry almost immediately. Others wanted exemptions for goods that are not sufficiently produced in the United States, such as coffee.
Meanwhile, economists warned that rigid tariffs by increasing the prices of imported goods would severely impair another campaign promise: that Trump would reduce inflation. But Trump has a theory about tariffs that has been solidified over 40 years, one that has been frozen in place and is resistant to data that contradicts its instincts.
Over the course of many years, when he was introduced to statistics that did not align with his instincts, he required people to find alternative information that would support their beliefs. Then he moved on, even as his advisers struggled to communicate to the public about a policy that they did not fully understand.
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Advisers held multiple meetings with Trump and his senior counselors to try to find a way to convince the public that economic penalties were a good idea. For a while, the rates created a dynamic that Trump likes best-global leaders coming to him and, as he said on Tuesday night, “kissing my ass” in search of agreements.
Administration officials said more than 75 countries had contacted them. But the warning signs have become too serious to ignore.
Changing course
On Wednesday morning, Trump encouraged Americans to buy stocks and urged companies to move to the United States. It was not clear at that moment that hours later he would abruptly change direction and put a 90 -day break in many of the tariffs.
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Financial markets fired after reversal, leaving questions about whether Trump’s previous recommendation of a purchase opportunity was a signal that some investors could have used to profit from increasing stock prices.
But shortly after Trump posting his message on social networks, he met at the Oval Hall with Bessent, Lutnick and Kevin Hassett, the director of the National Economic Council. They discussed with the president the income of the 10 -year titles, emphasizing the concern with the health of the broader financial system in the US.
Trump, in particular, understood what the increase in securities will mean banks and their long -term loans, a topic he understands intimately from his years by managing a real estate company.
Tariffs had triggered a sharp sale in US government and dollar titles markets, which investors usually see as assets of secure refuge in times of turbulence.
After Trump announced new rates last week, Economists on Wall Street rapidly increased their inflation predictions and reduced growth, with many warning about a recession. Trillions of dollars in market value of stock have disappeared in a matter of days.
At 1:18 pm on Wednesday, Trump announced in the social truth that he would retreat in “reciprocal” tariffs for 90 days as he increased tariffs over China to 125%.
The pause, along with the maintenance of a 10% rate for most countries, was a version of what several people had urged Trump to implement for days.
Speaking of reporters shortly after Trump announced reversal, Bessent and Leavitt tried to create the impression that this was the culmination of a carefully elaborated plan – to isolate China as the main culprit for inflicting pain to American workers.
“That was his strategy all the time,” said Bessent. Leavitt tried to frame the change in politics as a negotiating genius work.
“Many of you in the media clearly lost ‘the art of negotiation.’ You clearly failed to see what President Trump is doing here, ”she said.
“You tried to say that the rest of the world would be moved closer to China, when we actually saw the opposite effect. The whole world is calling the United States of America, not to China, because they need our markets, need our consumers, and need this president in the oval hall to talk to them, and that’s exactly what more than 75 countries have called.”
Trump’s senior counselor Stephen Miller has led to another level on social platform X: “You are watching the largest economic strategy of an American president in history.”
Bessent said the president was pausing the tariffs because the administration was receiving so many requests to negotiate, and each negotiation would be “tailored” and therefore “would take some time.”
The Treasury Secretary did not answer a question directly about why investors would entrust that this was Trump’s final word after so many changes.
Trump’s actions cover only the next 90 days. As for any additional exemptions of tariffs, the president refused to give the clarity that many investors are seeking.
Asked on Wednesday about how he would decide on any additional exemptions, Trump said: “Instinctively, more than anything else. I mean, you can hardly get a pencil and paper. It’s really more instinct, I think, than anything else.”
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