What Trump’s tariff pause can’t solve

Much has apparently changed in the last 24 hours in the US economy.

The S&P 500 opened Wednesday more than 10 percent down since President Donald Trump announced his sweeping tariffs on American imports. Goldman Sachs had raised its recession odds to 45 percent. Investors believed they no longer had the ear of the president. US Treasury yields were spiking, a signal that investors’ confidence in the strength of the American economy was wavering.

With a single post on Truth Social, however, Trump seemed to begin to turn things around. He announced a 90-day pause on some of the extremely high country-specific tariffs he’d announced last week. And while Trump also announced further escalation in the trade war with China, the 90-day reprieve was enough to boost the nation’s economic outlook: The S&P 500 surged in response, Goldman rescinded its recession prediction, and US Treasury yields — a partial metric of economic uncertainty — also decreased somewhat.

For the many Americans anxiously watching their stock portfolios amid the tariff chaos, this should be good news.

But even with some of the tariffs paused, there’s a deeper economic malaise taking hold. The uncertainty created by Trump’s whiplash-inducing changes to the US’s trade policy is not just going to evaporate. And even at their current level, Trump’s tariffs are already upending the global trade order in hard-to-predict ways. That’s a problem for business owners, investors, and the everyday Americans impacted by their decisions.

Trump’s announcement of a 90-day pause has brought some relief to investors and business owners who previously had no time to prepare for one of the most significant changes to US trade policy in the better part of a century.

Dominic Pappalardo, Morningstar Wealth’s chief multi-asset strategist, said that those affected now have “at least a small window to prepare, plan, and adjust for the impact.” The pause also allows individual countries time to negotiate the tariffs and for the US to pare them back.

“I believe these windows of optimism are what caused markets to rally so aggressively on today’s announcement,” Pappalardo said.

But the pullback did nothing to address economic uncertainty.

The economy runs on confidence in the future. Businesses make plans months or years in advance in the hope that their investments will eventually pay dividends. Consumers, too, are more likely to spend on goods and services that these businesses sell when they feel good about their prospects. Their spending helps support economic growth and a solid job market.

However, despite Wall Street’s initial enthusiasm, the US economy is now grappling with increased uncertainty due to Trump’s reckless tariff threats and only partial reversal.

Before Trump assumed office, many investors bet on a “Trump put,” the notion that the president would design his policies to bolster the stock market. A flat 10 percent tariff on all imports was then considered a nightmare scenario. And when considering tariffs on China and other countries together, the effective tariff rate is now 25 percent higher than it was before.

Substantively, these tariffs are still steep. They will negatively impact the economy: Producers are still likely to pass on higher costs to American consumers and to lay off their workers, potentially causing unemployment to rise.

But even outside of those direct impacts, the way Trump hurriedly rolled out these tariffs — and then quickly changed course — is not a comforting sign for anyone trying to do business in the US. The American economy now appears to be subject to the whims of a man who has what The Economist called an “utterly deluded” understanding of economics and history.

That’s left business owners and investors questioning whether it’s worth taking the risk of sinking more money into the US market. That uncertainty isn’t going away just because Trump hit pause on some of his proposed tariffs.

“Uncertainty is what’s crushing the markets right now,” Preston Caldwell, Morningstar’s chief US economist, said ahead of the pause.

Barring a law taking the power to implement tariffs away from the executive branch, nothing can reverse the vast majority of the damage caused by that uncertainty, he added.