President Donald Trump’s approach to trade negotiations landed the U.S. in a familiar place over the weekend.
Announced with fanfare back in April on “Liberation Day,” the sweeping tariffs were met with a market swoon and quickly delayed. Then, businesses began stockpiling inventories, and negotiations with key trading partners began. A few deals – or deal frameworks – were announced. Despite dire warnings from economists, the summer saw a lull in any meaningful inflation from the tariffs.
Then on Oct. 12, Trump mixed it up again, announcing a 100% tariff on China after the Asian nation said it was limiting exports of rare earth minerals that are key components in semiconductors and other high-tech manufacturing. Markets fell sharply on the news. But Trump assured he would be able to make a deal with Chinese President Xi Jinping, a leader he touts as “very strong.”
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On Monday, as he headed to Japan, Trump confirmed a deal with China was in the works, potentially settling a critical dispute between the world’s two largest economies. Officials said the two nations had come to an agreement in which the U.S. tariffs are halted and China postpones its export licensing plan for a year.
It was a familiar pattern for Trump. The threat of a sharp increase in tariffs is consistent with his style of striking first publicly, then letting negotiations go on behind the scenes as he waits for the opportunity to announce a deal that he asserts only he could have made.
Speaking on NBC’s “Meet the Press” Sunday, Treasury Secretary Scott Bessent said, “President Trump gave me a great deal of negotiating leverage with the threat of the 100% tariffs, and I believe we’ve reached a very substantial framework that will avoid that and allow us to discuss many other things with the Chinese.”
Bessent also said the two nations had made progress on a deal to bring relief to U.S. farmers who have struggled under China’s boycott of American soybeans. China bought about half of the U.S. soybean production in 2024.
Averting more stringent tariffs will be good news for consumers, who are starting to see the effects of the levies moving into the economy and raising overall inflation – still the No. 1 concern for many Americans.
“Tariffs and the weaker dollar have likely added roughly 0.4 percentage points to headline inflation this year,” said Mark Vitner, chief economist at Piedmont Crescent Capital. “We expect the impact from tariffs to wane next year, while housing costs and prices for services outside of housing ease further.”
While Trump and Xi may come to a deal, things are not going so smoothly with another key trading partner: Canada.
The neighboring nation has yet to reach a tariff deal with the U.S. On Friday, after a Canadian province began airing an anti-tariff ad featuring former President Ronald Reagan, Trump said he would slap an additional 10% onto Canada’s tariff rate.
Ontario Premier Doug Ford had said he would pause the ad campaign but not until after the weekend and that it would continue during the World Series games between the Los Angeles Dodgers and the Toronto Blue Jays.
En route to Asia Saturday, Trump said he had no intention of meeting with Canadian Prime Minister Mark Carney while the latter is also in Asia for the global meetings.
Whether Trump’s unconventional trade policy will work with Canada as it appears to have with China remains to be seen.
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