US politics newsletter - Whiplash

By James Oliphant

WASHINGTON, April 10 (Reuters) - After days of stomach-churning stock market losses and concerns about growing global economic instability, the president pulled a stunning about-face on Wednesday, suspending his threatened worldwide “reciprocal” tariffs for three months. The markets responded with a massive rally, calming the frayed nerves of everyone who has been worried about their retirement accounts and other investments.

Just two days earlier, the White House had shot down a report that such a move was being considered as “fake news.” But Trump told reporters on Wednesday he had been thinking about it for several days.

The reeling market made even some of Trump’s closest allies nervous, including fund managers such as Bill Ackman and congressional Republicans , who sounded the alarm about next year’s midterm elections. And the fallout sparked a tiff over tariffs (say it quickly) between Elon Musk and Trump trade adviser Peter Navarro.

Even Americans who don’t follow the market were growing anxious, a Reuters/Ipsos poll found this week , with a large majority expecting price increases as a result of Trump’s policies.

Given that, Trump’s pull back made some sense. But it has never been particularly clear what the White House’s strategy was in the first place. Aides such as Navarro insisted tariffs were here to stay and were not meant to be viewed as leverage to spur negotiations. And even as Trump suggested that the tariffs were bad-tasting “medicine” that Americans would have to swallow for the economy to reset, he continued to boast about nations calling him to strike deals to avoid the levies.

On Wednesday, the administration insisted that bargaining was always the plan.

"President Trump created maximum negotiating leverage for himself," said U.S. Treasury Secretary Scott Bessent, whose role on Trump’s trade team has been elevated .

Leverage is clearly something Trump believes in, whether it’s using the power of his office to force law firms to the bargaining table, freeze funds for universities whose policies he opposes or threaten Iran with a military strike if it doesn’t agree to abandon its nuclear program.

But this seemed to be more of a case where Trump had to put out a fire he started himself before it burned the house down.

Even so, Wednesday’s reprieve may be short-lived. Trump is still escalating his trade war with China, which is showing no signs of backing down. And Wall Street analysts say the U.S. remains a difficult environment in which to do business because of the president’s unpredictability. Three months is not a lot of time for Trump to reboot the country’s economic relationship with the rest of the world – if that was really his goal in the first place.

THE VIEW FROM PANAMA CITY:

Officials in Panama this week said that U.S. recognizes Panama’s sovereignty over the Panama Canal after U.S. Defense Secretary Pete Hegseth visited the Central American country. Trump has said it was a mistake for the U.S. to have given Panama control over the canal in 1999 after building it more than a century ago.

WHAT TO WATCH FOR:

April 12: U.S. and Iran may engage in talks in Oman

April 14: El Salvador's President Nayib Bukele meets Trump at the White House

April 17: Italy's Prime Minister Giorgia Meloni meets Trump at the White House

THE WHO, WHAT AND WHEN:

• What’s in Trump’s partial tariff pause

• Trump tariffs: List of global responses and countermeasures

• Trump’s trade war: Prescription drugs become a target