In a surprising shift, President Donald Trump hinted on Thursday that he might halt further tariff hikes on China, acknowledging that escalating duties could choke consumer spending and damage the U.S. economy.
Speaking to reporters in the Oval Office, Trump said, “At a certain point, I don’t want them to go higher because at a certain point, you make it where people don’t buy.”
His words mark a rare admission of the economic toll his trade war is exacting, as inflation potentially surges and economists warn of an impending recession. With markets reeling and consumer prices climbing, Trump appears to be grappling with the consequences of a policy that has sparked global retaliation and domestic unease, raising questions about the sustainability of his “America First” agenda.
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Trump’s tariff offensive began with a flourish on April 2, dubbed “Liberation Day,” when he imposed a 10% duty on nearly all U.S. imports and targeted 90 nations with reciprocal levies. By April 9, tariffs on Chinese goods, which account for $143.5 billion in annual U.S. exports, soared to 145%, intensifying a trade war with the world’s second-largest economy.
The move, intended to revive American manufacturing and fund tax cuts, has instead unleashed a wave of unintended consequences. Consumer prices are spiking—apparel up 17%, food up nearly 3%, and vehicles up over 8%—as businesses pass on the costs of tariffs, which act as a tax on U.S. importers. Economists estimate these duties could slash household purchasing power by $2,100 annually, pushing inflation toward 4% by summer and threatening the consumer spending that drives 70% of U.S. economic growth.
The economic warning signs are unmistakable. The S&P 500 shed nearly $6 trillion in value in early April, with a record 4.8% plunge on April 3, as investors braced for a tariff-driven downturn. Retailers like Walmart report rising costs, while Delta Air Lines notes a stall in travel demand, with hotel bookings and airline ticket sales faltering. Consumers, squeezed by higher prices, are cutting back on discretionary spending, fueling fears of a broader economic slowdown. Major financial institutions now peg the odds of a recession within the next year at 45% to 60%, with some projecting U.S. GDP growth as low as 0.6% in 2025.
Trump’s remarks suggest he is beginning to feel this pressure. His concern that “people aren’t going to buy” reflects a growing awareness of declining demand, a stark contrast to his earlier dismissal of inflation fears. The Federal Reserve, caught in a bind, warns that tariffs could derail its dual mandate of stable prices and full employment, with interest rates likely to remain elevated, further straining growth.
The tariffs’ impact extends beyond U.S. borders, shaving nearly a percentage point off global GDP and pushing economies like Japan, South Korea, and Canada toward recession. China, hit hardest, has retaliated with an 84% tariff on U.S. goods, suspended exports of critical rare earth metals, and curbed imports of Hollywood films and Boeing aircraft, signaling a deepening global trade conflict.
China’s defiance is pushing the escalation. Dismissing Trump’s tariffs as a “numbers game” with little economic bite, Beijing’s foreign ministry has vowed to press forward with countermeasures. However, Trump, emphasizing his “very good relationship” with Chinese leader Xi Jinping, hinted at ongoing negotiations, noting Xi’s repeated outreach.
“I think we’re going to be able to make a deal,” he said, suggesting a potential path to de-escalation. He also tied the tariff standoff to the fate of TikTok, whose parent company ByteDance faces a summer deadline to divest its U.S. operations or exit the market.
“We have a deal for TikTok, but it’ll be subject to China,” Trump said, indicating trade concessions could be part of a broader agreement.
The tariffs’ domestic toll is equally stark. Automakers like Stellantis are announcing layoffs and plant closures in Canada and Mexico, while General Motors grapples with rising production costs. Retailers, wary of consumer backlash, are poised to raise prices further by summer, with a high-end smartphone potentially costing $2,300 if costs are fully passed on. Low-income households face disproportionate losses, with annual burdens estimated at $1,700, exacerbating economic inequality. Public sentiment is souring, with polls showing widespread concern about price hikes and skepticism about the tariffs’ promised benefits.
Globally, allies are bristling. Japan and South Korea, slapped with 24% and 25% tariffs, are preparing retaliatory measures, while the European Union warns of “burdensome” costs for businesses. Canada and Mexico, targeted with auto tariffs, face economic strain, with Canadian consumers boycotting U.S. travel. Trump’s insistence on “balanced bilateral trade” has met resistance, with even Vietnam’s offer to eliminate tariffs on U.S. goods rebuffed. The global growth forecast for late 2025, at just 1.4%, is the weakest since the 2008 financial crisis, excluding the pandemic era.
Trump’s shift comes amid these political and economic headwinds. His April 9 decision to pause reciprocal tariffs for 90 days briefly rallied markets, but renewed escalation fears have kept investors on edge. Senate Minority Leader Chuck Schumer’s warning of a “market crash” vaporizing retirement accounts has amplified calls for restraint. The Economic Policy Uncertainty Index reflects business caution, with firms delaying investments amid tariff volatility. The Federal Reserve’s projection of a -2.4% GDP growth rate for the first quarter underscores the urgency of addressing the crisis.
Against this backdrop, analysts believe Trump’s willingness to consider lower tariffs could stabilize markets and ease consumer burdens. However, it comes with challenges, based largely on the defensive demands of other nations involved. For instance, negotiations with China, potentially linked to TikTok and technology transfers, offer hope, but Beijing’s hardline stance complicates prospects.
If tariffs remain at current levels, economists predict unemployment could rise to 4.5% and inflation could hit 4.7%, pushing the U.S. toward stagflation—a toxic mix of high prices and low growth. The Federal Reserve, facing a “rock and a hard place,” may struggle to avert a downturn without exacerbating inflation.