From “Liberation Day” to Chaos: Trump Pauses Most Tariffs While Escalating Trade War with China

NERMEEN SHAIKH: Global stock markets surged on Wednesday after President Trump announced a 90-day pause on sweeping new tariffs for most countries, while at the same time escalating the U.S. trade war with China. Trump raised tariffs on China to 125% after China increased tariffs on U.S. goods to 84% following the Trump administration’s initial tariff increases. China has also taken other retaliatory actions, including new restrictions on rare earth exports to the U.S.

As for most of the rest of the world, a 10% tariff remains in place, but the more sweeping tariffs were paused just hours after going into effect. Global stock markets had been tumbling ever since Trump announced the new tariffs on April 2nd, on what he called “Liberation Day.”

AMY GOODMAN: The Trump administration has given conflicting accounts as to why Trump reversed course. Treasury Secretary Scott Bessent said it was Trump’s, quote, “strategy all along,” but Trump himself openly admitted he was concerned about the unraveling of the U.S. bond market.

PRESIDENT DONALD TRUMP: The bond market is very tricky. I was watching it. But if you look at it now, it’s — it’s beautiful. The bond market right now is beautiful. But I saw last night where people were getting a little queasy. I think everything had — well, the big move wasn’t what I did today. The big move was what I did on Liberation Day.

NERMEEN SHAIKH: On Wednesday, the S&P 500 soared 9.5%, and the Nasdaq jumped over 12%, after Trump made his announcements about the tariff pause in a post on Truth Social just before 1:30 p.m. Earlier in the day, Trump wrote, quote, ”THIS IS A GREAT TIME TO BUY!!! DJT.”

Democratic Senator Adam Schiff is now calling on Congress to determine whether the Trump administration engaged in insider trading or market manipulation. Bloomberg is reporting the world’s richest people added $304 billion to their combined net worth on Wednesday, the largest one-day gain in the history of the Bloomberg Billionaires Index.

AMY GOODMAN: We’re joined now by two guests. From Rome, Italy, Nancy Qian is with us. She’s a professor of economics at Northwestern University, co-director of Northwestern University’s Global Poverty Research Lab, founding director of the China Econ Lab. Her latest piece for Project Syndicate is headlined “Americans Can’t Win from Trump’s Trade War.”

Joseph Stiglitz is with us in studio here in New York, Nobel Prize-winning economist, Columbia University professor, former chair of the Council of Economic Advisers. Professor Stiglitz is also currently the chief economist of the Roosevelt Institute. His latest book, The Road to Freedom: Economics and the Good Society.

We welcome you both to Democracy Now! Professor Stiglitz, let’s begin with you. Just overall respond to this roller coaster. And if anyone has any doubt that global outcry matters and protests around the globe make a difference, like what happened this weekend, well, just take a look at what happened yesterday. Can you talk about, Professor Stiglitz, your response?

JOSEPH STIGLITZ: There’s been total chaos. And one of the things that we know is that chaos is bad for the market. But there’s been already lasting damage. You know, for the last 80 years, we were trying to create a world where — a borderless world. At least borders mattered less. All the sudden, borders matter more. And it’s not only borders with those you don’t like. It’s borders with our best friends, in Canada. So, this is a new world where every country has to ask a question that we never asked before: What is the extent of our national economic sovereignty? What will happen if some crazy person in another country — in the United States, for instance — would suddenly raise tariffs 20%, 10%, 20%, 50%, 100%? So, there is no reliability in our relationships, whether with friend or not so friend.

What is also clear is that Trump has no economic theory behind what he’s doing. And I think that’s most disturbing both to me as an economist and to those who are on the other side in the negotiations. I’ve talked to some of these people, and they say, you know, “We don’t know how to negotiate, because the other side is not a normal negotiator.” You know, normally, the other side knows what they want. There’s a theory about how trade works. That’s not true here. It’s a different world.

So, let me give you an example. Trump thinks that trade deficits by themselves, and, in particular, trade deficits in goods, reflect somebody treating us unfairly. And it’s based sort of on a premise that we are better than any other country, so people should be buying more goods from us than we are buying from them. It’s absurd. The magnitude of the multilateral trade deficit is just determined by the disparity between aggregate savings, on the one hand, and — national savings, and aggregate national investment, on the other. And if savings goes down, then we’ll have a bigger deficit. Now, his proposal to have a big tax cut, unfunded, is effectively a lowering of national savings, and that’s going to make the multilateral trade deficit larger.

Then you look at the microeconomics. I just want to make sure — he makes a big difference between goods and services. But we are in the 21st century, not where we were in 1950. Services are the major part of our economy. Goods production, manufacturing, is 9%, 10%. What are important service sector? Tourism, education, health. What is he doing to those sectors? Look what he’s done in the last few weeks. He’s devastated our education system. The way his border, immigration people have treated those wanting to come into our country, with valid passports, visas, has discouraged tourism. So, he is hell-bent at hurting America’s major export industries, tourism and education. So, he’s making things just that much more worse, at the micro level and at the macro level.

NERMEEN SHAIKH: So, before we bring in professor Nancy Qian, I wanted to ask you — you just said earlier that chaos is bad for the market. Indisputable. But how do you explain — people are absolutely perplexed. We had that in the introduction, as well. How is it that just as Trump declared a pause on these tariffs, the markets soared? And not just soared, I mean, for the biggest daily gain since 2008, the S&P. What explains that?

JOSEPH STIGLITZ: Well, remember that the market had gone down enormously, almost into bear territory, in the two preceding days.

NERMEEN SHAIKH: Yeah.

JOSEPH STIGLITZ: There is a lot of irrational exuberance at times in the market. My judgment is that they’ve made a mistake. And the reason I think there’s a mistake is the importance of trade with China, in many ways, is much larger than trade with Europe, that we depend enormously for goods coming from China. You know, we buy cars from Europe. If we don’t have the European cars, you know, we suffer a little bit, but it’s not a big deal. If we don’t have the ingredients that go into so many of our goods, or if those ingredients go up twice in price, that’s a big disturbance. So, I’m anticipating that there will be actually a very big disturbance from these enormous, unprecedented — let me emphasize “unprecedented” — tariffs against China, and China’s retaliation, including their restrictions on exports of minerals and rare earths that we need for our production.

NERMEEN SHAIKH: So, Professor Nancy Qian, if we could get you to respond to the scale of these tariffs and what you think the impact on the Chinese economy and also the U.S. economy will be on these 125% that the U.S. has imposed on China and 84% that China has imposed on the U.S.?

NANCY QIAN: Like Professor Stiglitz said, these tariff rates are unprecedented. They are so high, it’s really difficult for us to calibrate exactly what the cost will be on everyone, except that we know it’s going to be enormous. You know, already we’re seeing contracts that are being canceled between Chinese suppliers and American importers. Business relationships that took decades to build are now being paused, because these tariffs are so high that no one can be profitable, can stay in business and continue to import.

And, you know, the thing about tariff rates is, if you increase it a little bit, then maybe people can take the hit. By “people,” I mean the firms, the exporters and the importers. But if you increase it a lot and they can’t make their bottom line, then they just have to stop. And we’ve just never seen anything like this before.

And what does that mean for the U.S. if we can’t get parts from China? And also, what does it mean for China if they have to shut factories, factories that are supporting families, you know, and children, that were relying on these export jobs? So, I think the cost for both economies is going to be colossal. We’ll see a little bit of it in the short run. And if this continues, we’re just going to see it exponentiate over time.

AMY GOODMAN: Let me ask you, Professor Qian, about the Treasury Secretary Bessent’s comments when he said, you know, this was all planned. The question is, of course: Was insider trading planned? Trump boasted yesterday the greatest increase in the stock market that the country, it had ever seen. And, of course, the question is how these billionaires and, perhaps — I can’t say this, I know this — I don’t know this — that Trump himself benefited yesterday as it rose, buying early? But Bessent’s comment, “You might even say [Trump] goaded China,” and they showed themselves to be the “bad actor” that they are. Your comment, Professor Qian? I think we just lost Professor Qian in Rome, Italy, so we’ll put that question to Professor Stiglitz.

JOSEPH STIGLITZ: Well, I don’t think they anticipated this kind of response. The kind of language they used was a schoolyard bully. It was, “They didn’t show us respect.” And, of course, China’s view was U.S. broke international economic law. We have an international framework, the WTO, that is supposed to determine how countries determine trade policy. And we just threw that whole agreement — that we played a key role in writing — we threw it in the dustpan. So, the argument that, “Oh, he didn’t show me respect,” is the kind of language you hear from bullies. I don’t think we expected them to act so respondingly.

I was in China about two weeks ago, and it was very clear that they were ready for another round, because they had seen how erratic Trump was. And there is a fundamental asymmetry that I think Trump and his team doesn’t fully grasp. The asymmetry is that China will experience a deficiency in aggregate demand as they lose their exports. You can shift that demand to producing domestically. And they’ve been trying to do that for a number of years, and this is going to move. Much harder to shift supply. So, we are in a tighter bind, I think, than China.

AMY GOODMAN: So, Professor Qian is back with us. Professor Qian, that comment of the treasury secretary that this was all planned and that Trump successfully managed to goad China so that they would show themselves to be the bad actors that they are? And Vance’s comment the day before, referring to the “Chinese peasants”?

NANCY QIAN: It’s really hard to believe that all of this was planned as a strategy to get to China, you know, for a bunch of different reasons. One is, you know, the unique adversarial relationship between China and the U.S. is well known and has been going on since the first trade war. So there’s really no new information to be learned.

The second is that the Chinese and the U.S. had actually been negotiating, and the Chinese had shown themselves to be really willing to negotiate and really not desiring a trade war. So, you see that, for example, in the negotiations over the TikTok deal. So, under the Biden administration, it was — TikTok was asked to divorce itself from its Chinese owners, ByteDance. At the time, the Chinese government said, “No way, we’ll never let ByteDance sell TikTok to Americans.” But then, under the Trump administration, what we saw was that the negotiations proceeded quite rapidly. And two days before it became official, that’s when the U.S. hiked up tariffs on China to another 34%. So, that just doesn’t feel like a well-planned strategy.

Another way to ask it is to say, “Well, what has the U.S. government achieved now that it couldn’t have achieved without raising tariffs for the entire world?” Right? What did it achieve by increasing tariffs for islands with only penguins on it? What was the point of that? Did that tell anyone anything about American strength or about China? And the answer has to be no.

AMY GOODMAN: There’s that cartoon going around: “First they came for the cats. Then they came for the penguins.” Nermeen?

NERMEEN SHAIKH: I wanted to ask about the broader implications of what it would mean for a massive cut in trade between the U.S. and China. The World Trade Organization said Wednesday that this escalating tariff war could cut trade in goods between the two countries by 80%, and trade between China and the U.S. accounts for 3% of global trade, all global trade. So, what would that mean? What are the fallout effects of that on other countries, much smaller economies? And, Professor Stiglitz, this point that you made about having broken — the U.S. having broken international economic law, Bernie Sanders issued a statement yesterday saying that what he’s done is actually unconstitutional, that Trump does not have the authority to impose the tariffs that he has. So, if you could comment on both those things?

JOSEPH STIGLITZ: So, let me begin by first emphasizing there’s going to be a big economic effect on the United States, because the time it takes to bring manufacturing back in the United States, even if he were successful, is not three months, not even a year, two years. I’ve talked to firms that have thought about bringing manufacturing back to the United States. They say, “We don’t have the logistics. We don’t have the supply chains that you need to bring complex manufacturing back.” And modern manufacturing is robotic. So, even if we brought manufacturing back, there are not going to be many jobs. So, the reality is that his picture of bringing us back to the 1950s, that’s never, never going to happen.

But what’s going to happen in the meanwhile? We’re not going to be able to get those goods that Americans want. We saw what happened when the supply chains got interrupted after the pandemic and after the Russian invasion of Ukraine. Prices soared, some goods more than others. And that’s the world we’re going to be back in. That’s going to affect, of course, not only the United States, but every other country. If the Fed acts like it normally does when prices go up, it raises interest rates, we’re going to go back into stagflation.

AMY GOODMAN: Who has Trump’s ear? I mean, you’ve got the trade whisperer, Peter Navarro — right? — who was, you know, top economic trade guy in the first administration, then went to prison, is now out, and continually cites the economist “Ron Vara” for why it’s important to trade — to impose tariffs. And it turns out that Ron Vara is just an anagram of Navarro. He doesn’t even exist. You can’t make this stuff up. And now, of course, Donald Trump would call reporters for years as “John Barron,” so it’s very similar, also a fictional person. In fact, it was Donald Trump. So, who is advising him? And what about the fact that people like Elon Musk joined with the broligarchy, the other billionaires, against what he was doing, attacked Navarro nonstop, calling him a “moron” and a “sack of bricks,” but said that was an insult to bricks?

JOSEPH STIGLITZ: Well, I mean, there is no one that he seems to be listening to. In many ways, Trump is giving protectionism a bad name. There is an argument that you can say that carefully constructed policies can help build particular industries. But —

AMY GOODMAN: So, UAW President Shawn Fain makes that argument.

JOSEPH STIGLITZ: Yeah, in particular industries. It has to be crafted. More important for developing countries than developed. We don’t need that as much as a poor developing country. But sometimes you can use carefully crafted trade policies to do that. But his broad-based policies, his going after Canada, his going after the penguins, makes absolutely no sense.

And what he’s bringing back is the concern that we’ve had, that political economists have had for a very long time: It could be a source of corruption. When you negotiate in a nontransparent way, what happens is bribes get paid. You say, “Take off my tariff, and I’ll give you money, money either directly to you or to your campaign coffers.” So, we are going back into a nontransparent world, where, for instance, the billionaire tech bros can help shape global tech policy in international trade to the detriment of the entire world. He’s already done that. He’s made a big deal about the EU changing its laws that try to create competition in the tech sphere, to try to make sure that there’s AI safety and social media safety, content moderation. He’s attacked these fundamental laws. And all this is going to be going on in secret and with a lot of dirty stuff.

AMY GOODMAN: And just boasts, like he did the other night, “I’ve got all these countries kissing my” — I won’t say it, but it rhymes with “grass.” Nermeen?

NERMEEN SHAIKH: And just before we conclude, Professor Qian, if you could give us an idea: What is happening in China? What are you hearing about how industries there are preparing for what’s to come?

NANCY QIAN: So, China, the voices in China are surprisingly calm. You know, the government is trying to strike a balance between preparing the people for economic pains to come and getting people into a mindset of solidarity. You know, they are blaming — obviously, they’re blaming this entire — these tariff hikes on the Trump administration and the U.S. government. And people find that convincing in this case.

At the same time, they’re also trying to not stir up too much nationalism. So they’ve been really careful to actually censor how high the tariff hikes have been by the U.S. They’ve been careful. And, you know, my reading of what’s going on is that they’re creating space so that they can get out of this — right? — so that there’s a face-saving way to negotiate and get out of this trade war if an opportunity presents itself. And, you know, in the meantime, of course, the central bankers, the industries, everyone is lining themselves up for a deep and long trade war.

AMY GOODMAN: I want to thank you, Nancy Qian, for joining us, pProfessor of economics at Northwestern University in Chicago, but joining us from Rome, Italy, and Joseph Stiglitz, the Nobel Prize-winning economist and professor at Columbia University.

Coming up, we look at President Trump’s latest threats to bomb Iran, just days before the U.S. and Iran hold talks in Oman. Stay with us.