When Is the Trump Tariff Crisis Going to Hit for Real?

When an earthquake hits somewhere in the ocean, surrounding countries near and far brace for the big waves that inevitably follow. U.S. President Donald Trump’s tariff announcements are just such a tectonic shift in U.S. policy. As with a tsunami, however, the impact varies from place to place and arrives after a certain delay. The better-prepared industries and countries put up their own protective walls. The rest take out their lifejackets and hope for the best.

In advance of the August 1 deadline set by Trump for a minimum 10% tariff imposed worldwide, many countries scrambled to make deals with the United States. The United Kingdom negotiated hard with the Trump administration and managed to negotiate that 10% tariff down to…10%—plus carveouts for exports like steel and beef, some of which didn’t end up in the agreement that Washington announced the following month.

The U.K. deal was a hastily negotiated affair, more of a “concept of a plan,” as Trump once described his imaginary replacement for Obamacare. “Trade deals typically take years to complete—the average negotiation lasts 917 days,” writes Antonia Hitchens in The New Yorker. “The U.K. deal, like others that are still in progress, is more of a basis for continued negotiation than an actual commitment. The terms are vague and unenforceable, reversible, and nonbinding.”

It’s not difficult to imagine that seasoned trade negotiators are squaring off against Trump’s team, which includes the unseasoned and frankly incoherent Commerce Secretary Howard Lutnick, to make deals that contain holes big enough to drive a truck through (all the way to the United States). The early evidence is that Trump’s tariffs are backfiring in many ways, including the one statistic that obsesses the president. America’s trade deficit with the world is only increasing.

Speaking of seasoned and unseasoned negotiators, I used a culinary metaphor six years ago to describe Trump’s use of tariffs in his first term. “Trump uses tariffs like a bad cook uses salt,” I wrote. “It covers up his lack of preparation, the poor quality of his ingredients, the blandness of his imagination. It’s the only spice in his spice rack.”

To extend the metaphor, the president is currently salt-bombing the world with tariffs. This heavy hand with the salt shaker is raising the global economy’s blood pressure. Worse, the United States itself is on the verge of an economic heart attack.

Whichever metaphor you prefer—tsunami or salt-induced heart attack—the question on everyone’s mind is: When is the crisis going to hit for real?

Is He Serious?

Many people have shrugged off Trump’s tariffs as so much hot air. He has made outrageous threats only to subsequently back down, negotiate face-saving deals, or include so many exemptions that the deal is essentially meaningless. That’s the position on Trump’s tariffs taken by Wall Street, where the stock market has recovered from an initial panic attack to rise to record levels.

Consider the administration’s approach to China, the third or fourth largest U.S. trade partner depending on the metric. In early April, Trump decided to apply tariffs of about 145% on Chinese products. The Dow tanked, and U.S. businesses freaked out at the prospect of huge price increases on components and finished products coming from China.

Negotiations with the Chinese followed, during which Trump backpedaled like a prizefighter sustaining a series of body blows. The Chinese economy is doing pretty well, and they have natural resources like rare earth elements that the United States desperately needs. So, when China retaliated with high tariffs of their own and threatened restrictions on rare earth elements, Trump was forced to deal. He reduced U.S. tariffs to 30% (while China reduced its tariffs on U.S. goods to 10%).

Trump can fire statisticians and issue doctored economic reports all he wants. But the Soviet Union—and its collapse—testify to the difficulty of maintaining such fictions.

But here’s the kicker. Trump also approved the sale of sophisticated computer chips—Nvidia’s H20 chips, which are designed for artificial intelligence applications—that previous U.S. administrations had blocked. This kind of compromise has signaled to various economic actors that perhaps Trump is not so serious about his tariffs—or, at least, he can be negotiated with.

Instead of fighting like the Chinese, the European Union accepted a 15% tariff rate. That’s “definitively better than the 30% threatened by Trump,” writes Cecilia Malmström of the Peterson Institute. “But it is still a lot more than the status of trade before Trump’s second term, when the average tariff rate between the European Union and the United States was only a few percentages. Today we face the highest transatlantic tariffs in 70 years.”

Unlike China, though, Europe is struggling to keep the Trump administration on board the effort to defend Ukraine, so this might be considered just another cost of doing business with an erratic president. As a sop to the administration, the E.U. has even postponed its reciprocal measures for six months.

Other countries are still negotiating. Canada saw its tariffs rise from 25% to 35%, though this applies to a minority of goods crossing the border that don’t comply with the U.S.-Mexico-Canada Agreement. Trump was pissed off at the earlier reciprocal tariffs against U.S. products, which Canada hasn’t yet removed. A “Buy Canada” campaign and a diversification of trade partners point to a longer-term reduction in Canadian dependency on U.S. markets and suppliers.

India, already looking at 25% tariffs, is now facing a doubling of that rate because it has continued to purchase cheap Russian fossil fuel exports. Although the Indian energy sector is already diversifying its purchases, the Indian government has refused to knuckle under to Trump’s demands. Brazil, too, has refused to stop its investigations into its former leader, coupster and Trump fan Jair Bolsonaro, so it’s facing a politically motivated 50% tariff from the United States. Taiwan is hoping to reduce its 20% tariff rate, probably by stressing U.S. dependency on the country’s semiconductor industry. Myanmar and Laos, both facing 40% tariffs, are going to have a much harder time making a deal.

The negotiations with China, the deals with the U.K. and E.U., and the recent 90-day moratorium extended to Mexico have all contributed to this sense that Trump Always Chickens Out. It’s not an accurate description. Trump doesn’t have a strong ideological position that he then abandons. He’s just spitballing, like someone trying out random answers to a question he doesn’t doesn’t understand.

Why Hasn’t the Pain Hit Yet?

U.S. businesses are also hoping that Trump will eventually retract his tariffs. Although markets fluctuate with the same kind of volatility that characterizes Trump’s temperament, manufacturers don’t appreciate such unpredictability. They’ve responded by employing interim hedging measures that have so far not passed on the costs to consumers. One popular tactic has been to stockpile. Reports CNN:

Best Buy rushed electronics from Asia. American Fireworks Company in Hudson, Ohio, stocked up on fireworks for the Fourth of July, almost all of which are made in China. Pet-gear seller Barton O’Brien from Kent Island, Md., borrowed money to get as many harnesses, collars and other supplies from China as he could store.

But the smaller businesses that rushed to buy supplies before April 1 are going to run out of inventory soon. And that will mean sticker shock across the board.

Some larger companies have decided, in the short term, to eat the losses. So, for instance, it doesn’t really cost more to buy a car right now—even though it should. In the first three months after Trump’s “Liberation Day” tariffs, General Motors lost over a billion dollars, Volkswagen about $1.5 billion, and Stellantis (owner of Chrysler) around $1.7 billion. But these automakers have not yet passed on these costs to the consumer. It’s an indicator of just how much these corporations are making in profits—General Motors raked in about $24 billion in 2024—that they can absorb such losses. It won’t last. They’ll likely increase prices alongside other price increases nationwide and then hit the consumer with price hikes when the next models come to market.

Consumers, meanwhile, have adopted the tactic of hoarding: consumer electronics, auto parts, building materials, clothing. Even members of the Trump administration have been stocking up on bulk toilet paper in anticipation of price hikes. But pantries can hold just so many bags of Brazilian coffee beans. And worse is to come.

A Perfect Storm?

Trump imagines, perhaps, that the pain associated with his tariffs will disappear in time for the midterm elections. At that point, he can have his own “Mission Accomplished” moment by standing atop a Ford car that contains only American-built components.

It’s not going to happen.

For one thing, the United States can’t possibly establish an entirely domestic supply chain in a couple years, if ever. Some things just don’t grow in this country (bananas), can’t be found here (manganese), or is unlikely to be produced here by American workers (cheap clothes). The other challenge for the Trump administration is the inevitable price hike that accompanies the tariffs and the inflationary spiral that will take place when other countries begin to impose reciprocal tariffs.

Domestically, in the face of a perfect storm of economic discontent, Trump will probably borrow a technique from Elon Musk: buying off the electorate.

But that’s not all. These price increases are going to hurt just about when Trump’s cuts in government services begin to bite. He has authorized over a trillion dollars in cuts in federal healthcare and food assistance over the next decade. Most of those cuts will start after the midterms in December 2026,. But changes in health insurance through the Affordable Care Act will start in January 2026. And hospitals and clinics, anticipating Medicare and Medicaid cuts, will start making their own cuts before the feds turn off the taps.

Then there’s the surge in unemployment. The rate ticked up in July from 4.1-4.2%. Even that modest rise was enough to move Trump to sack the head of the Bureau of Labor Statistics whom he accused of tampering with the data to make him look bad.

Trump has promised a whole new era of job growth as corporations home-shore production and new factories spring up to produce the parts that tariffs have made precipitously expensive to import. But that’s not happening. Consumers, after this brief period of hoarding, are increasingly reluctant to spend. Construction and manufacturing are down. The economy is, according to a number of economists, on the verge of recession, and that means a steep increase in unemployment.

Trump can fire statisticians and issue doctored economic reports all he wants. But the Soviet Union—and its collapse—testify to the difficulty of maintaining such fictions. The perfect storm of rising prices, falling employment, and disappearing government assistance is on the horizon. How will Trump respond?

Higher Walls?

As with Ukraine, Trump might reverse himself and scale back his tariffs. But tariffs and lawsuits are so much part of his identity that it’s hard to imagine him abandoning the strategy any more than he’ll listen to doctors and stop eating Big Macs.

It’s more likely that, in the face of resistance and failure, he’ll double down, as he has done so often in his career. So, expect higher tariffs in the future against both allies and adversaries until he gets what he wants, which is capitulation. That strategy might work with small countries like Colombia, but it doesn’t stand a chance with Russia, China, or Brazil.

Domestically, in the face of a perfect storm of economic discontent, Trump will probably borrow a technique from Elon Musk: buying off the electorate. He has already introduced his $1,000 “Trump accounts” for babies born in the United States. Republicans want to send out a rebate check of $600 per adult and child, everyone’s share of the “savings” from the tariffs. This is an updated version of the Department of Government Efficiency check that failed to materialize when the savings from Musk’s cuts turned out to be modest (to the say the least) and Musk left the administration under a cloud.

This outlay of approximately $250 billion—in addition to gerrymandering in Texas, Ohio, and Missouri—may well buy the midterm elections for the Republicans, despite all the discontent bubbling up even in red districts. According to this scenario, Trump will reserve his trump card of martial law for 2028 when not even government handouts and partisan chicanery can compensate for the economic catastrophe that his administration will have triggered for ordinary Americans.

Maybe I’m wrong, and the United States will be lucky. The recent earthquake off the coast of Russia was projected to send huge tidal waves in the direction of Hawaii. That didn’t happen.

Trump might turn out to be a similar seismic event: all sound and fury but no tsunami. That was largely the case during his first term when his worst instincts were thwarted by people within his administration, by Congress, and by the courts. These obstacles have now been reduced to speed bumps.

So, unfortunately, I’m putting my money on the tsunami.