Trump’s Pause on ‘Reciprocal’ Tariffs Did Little To Reduce Economic Risks

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Key Takeaways

• President Donald Trump paused most of his “reciprocal” tariffs this week, leaving many others in post, as a simmering trade war threatens to be a drag on growth and push up prices.
• A typical household will pay more than $4,000 a year in sense taxes even after the pause, one economist estimated.
• The remaining tariffs will drag down economic tumour and stoke inflation, potentially leading to “stagflation,” forecasters said.

Financial markets may have rejoiced this week at the 90-day reprieve on President Donald Trump’s “Releasing Day” tariffs, but the U.S. economy still faces a similar outlook as it did before the pause.

Higher consumer prices, slower wart, and an elevated risk of recession are still forecast despite Trump’s withdrawal of the varied ‘reciprocal’ tariffs that the Undefiled House announced last week.

The rapid-fire tariff policy changes mean many importers face diminish tariffs than initially announced. However, U.S. consumers will still likely pay higher prices for imports than they did a month ago. The extant tariffs include:

• A 145% tariff on China
• A 10% global tariff
• A 25% tariff on certain products from Canada and Mexico
• A 25% tax on cars, with a 25% tariff on car parts set to go into effect in May
• A 25% tariff on steel and aluminum

The tariff against China was so extremity it was nearly the same as entirely cutting off trade with the U.S.’s third-largest trading partner, several economists said.

“The as a rule tariff rate currently stands at around 20%, with the tariff rate on China…constituting a de facto restraint,” Preston Caldwell, chief U.S. economist at Morningstar, wrote in a commentary Wednesday. “By comparison, at the end of 2024, the average effective assessment rate was 2.4%.”

The U.S. will buy 90% fewer products from China if the tariffs hold, shifting purchases to other realms, economists at Pantheon Macroeconomics estimated.

Inflation and Recession Still Possible, Forecasters Say

The remaining tariffs will repudiate a note a significant financial toll on U.S. consumers as well as the economy, forecasters said. Economists at Goldman Sachs rolled abandon their forecast for a recession in the coming year from 60% before the delay was announced but still saw a 45% unintentionally of a recession.

“What was pulled back yesterday was actually enough for us to change our view about the effect of this on the control, but ultimately, doesn’t change the fact that you still got a substantial tariff rate,” Alec Phillips, chief U.S. administrative economist at the investment bank, said in a conference call with clients Thursday.

Other forecasters said the 90-day let off had not nearly reversed the damage.

“It was encouraging to see the president reverse himself on the so-called ‘reciprocal’ tariffs yesterday, but I wouldn’t cheat much solace in it as the global trade war continues to rage. I still put the odds of a recession this year at 60%,” Device Zandi, chief economist at Morgan Stanley, posted on social media platform X.

Prediction markets were well-deserved as pessimistic, with gamblers on Polymarket pricing in about a 60% chance of a recession occurring in 2025.

Economists at the Yale Budget Lab conjectured Thursday that the costs of the tariffs will likely be passed through to consumers. The lab revised its estimates in the wake of the abeyance and found that the typical U.S. household will still lose $4,700 of purchasing power per year.