Trump surfs high on a wave of tariff unease, just the way he likes it

Washington: Donald Trump spent the weekend playing golf in Florida. He wore a MAGA cap and even posted clips on social media. Far from hiding from the tariff-prompted market crash, he was projecting nonchalance.

Meeting with Israeli Prime Minister Benjamin Netanyahu on Monday (Tuesday AEST), he was equally sanguine. If he was at all worried by the massive stock sell-off and growing drumbeat of opposition on Wall Street, he didn’t let on.

Israeli Prime Minister Benjamin Netanyahu with Donald Trump in the Oval Office.Credit: Getty Images

And that’s probably because in many respects, Trump has everyone right where he wants them. He says he has world leaders on the phone “dying to make a deal”, and offering to remove long-standing trade barriers, just as he demanded and predicted.

The European Union says it has made an offer to cut tariffs on certain goods. Japan and the United States are commencing talks. And in the Oval Office, Netanyahu provided a shining example for Trump to show the rest of the world. The Israeli leader pledged to cut down Israel’s trade surplus with the US to zero and eliminate tariffs, in what looked like a highly orchestrated but nonetheless valuable demonstration of Trumpian deal-making.

“If I didn’t do what I did over the last couple of weeks, you wouldn’t have had anybody who wants to negotiate,” Trump boasted. “Now they’re coming to us.”

Except China, of course, which has retaliated with tariffs of its own, vowed to “fight to the end”, and according to Robin Brooks at the Brookings Institution, started to devalue the yuan in what is “clearly a signal to Washington”.

The Yangshan Deepwater Port in Shanghai, China. Beijing retaliated against the latest wave of tariffs on exports to the US, only to have Trump threaten to increase them again.Credit: Bloomberg

So, as an exercise in American power, Trump’s tariff gambit is showing signs of success – except for the main target, the one country that is a true threat to that power.

Internally, Trump is surfing a wave of unease over the tariff program and what happens next. On one side, the finance establishment, led by Treasury Secretary Scott Bessent. It doesn’t love tariffs but will indulge them as a means to an end, and wants to see quick negotiations to reduce tariffs and trade barriers on both sides.

Politico revealed Bessent flew to Florida on Sunday, where Trump was golfing, to tell the president he ought to pivot his message to one of negotiation rather than punishment. And The Washington Post reported Elon Musk also made a direct appeal to Trump not to proceed with the steep tariffs.

On the other hand, Trump’s tariff-loving trade hawk, Peter Navarro, who went to jail rather than comply with a January 6, 2021 Capitol riot investigation, sees tariffs as the be-all-and-end-all. “This is not a negotiation,” he wrote in a piece in The Financial Times on Monday. “For the US, it is a national emergency triggered by trade deficits caused by a rigged system.”

As international editor Peter Hartcher revealed in his column, Navarro thwarted Australia’s hopes for a tariff exemption in the days leading up to last week’s announcement. Australian diplomats in Washington received encouraging and consistent messages from Bessent, and even from the tariff enthusiast Commerce Secretary Howard Lutnick, that Australia and the United Kingdom might be among the few countries, likely the only two, spared from the “reciprocal tariffs” entirely.

But Navarro carried the day. His argument, buttressed by long-standing grievances about other trade matters, was that if you give one country an exemption, everyone will demand one.

The markets may hate it, but this internal tug-of-war suits Trump. He retains the decision-making power, other countries are forced to offer more, and no one can promise anything because, ultimately, you don’t know who’s going to win out on any given day.

Australia is now, in effect, hamstrung by the federal election and cannot really advance the terms of any deal until it’s clear who will be in charge.

Many on the Australian side believe there’s no rush and that it’s actually better to sit it out for a while and see where things land. It’s also not clear Trump is that interested in the countries hit with the baseline 10 per cent tariff. Asked whether there was room to negotiate below that level, he gave a rambling non-answer and circled back to China.

Lying low may prove the right approach. If Trump can fry the bigger fish, he’s more likely to let the minnows go.

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