High Stakes and Uncertainty Heighten Concerns Over Trump Tariffs

By
Joe Killer
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President Trump is known for making a grand entrance, and he is not holding back for Wednesday’s announcement of reciprocal tariffs on America’s trade partners: Anticipate a significant declaration in the Rose Garden.

However, specifics are sparse. This ambiguity has resulted in a considerable drop in the stock market, with the S&P 500 facing its most significant one-month decline since 2022, as economists caution about the potential resurgence of a trade war that could inflame inflation and hinder global growth. (The futures market is indicating a difficult opening for the benchmark index on Tuesday.)

“If necessary, we have a robust plan to retaliate, and we will implement it,” warned Ursula von der Leyen, the President of the European Commission, on Tuesday.

The White House appears unfazed by these threats. This is despite consumer sentiment and business confidence continuing to show signs of instability. A CBS News poll released on Monday highlighted that many Americans are already experiencing some tariff fatigue and would rather see the president focusing his efforts on combating inflation.

White House officials have reportedly put together a proposal to impose tariffs of approximately 20 percent on a broad array of U.S. imports, according to The Washington Post.

The president and his team are doubling down on their tariff rhetoric: Trump views reciprocal tariffs — which he defines as “whatever they charge us, we charge them” — as a mechanism to restore jobs in the U.S. and adjust the nation’s trade deficit. Simultaneously, he has not shied away from introducing new tariffs: The recent announcement regarding taxes on autos and car parts took many in the industry by surprise, leading to a decline in auto stocks.

In the Oval Office on Monday, the president adopted a measured tone. “In relative terms, we’re going to be very kind,” he told reporters.

Yet, businesses are left with numerous questions: Who will be affected, what will the pricing be, and when will these measures take effect? Additionally, how is the Trump administration defining “reciprocal” as it targets trade policies perceived as discriminatory?

For instance, will Trump officials take into account how a country’s value-added tax (VAT) or digital services taxes contribute to the final costs that American businesses and consumers must incur? Trump has previously criticized VAT policies, labeling them as “far more punitive than a Tariff.”

International leaders and industry advocates are preparing for a confrontation. Beyond the European Union, Canada, China, and Mexico have begun implementing or have threatened to initiate retaliatory actions.

The White House also sees tariffs as a means of generating revenue. This argument may become increasingly significant as Republicans commence their efforts to make Trump’s 2017 tax cuts permanent and introduce new tax proposals. Next on the agenda: “No tax on tips, no tax on Social Security, no tax on overtime, and we will make purchasing an American car tax deductible once more,” Treasury Secretary Scott Bessent told Sean Hannity on Fox News on Monday.

In order to pass those cuts through Congress, Republicans will need to identify trillions of dollars in new savings, new revenue sources, or a combination of both. Peter Navarro, a senior trade policy adviser with hawkish tendencies, estimates that tariffs could generate approximately $6 trillion. However, this would necessitate a broad imposition of tariffs that could endure for years — a daunting scenario for the free-trade faction within the party.

“We are addressing an issue that divides rather than unites Republicans,” Stephen Moore, an economist at the Heritage Foundation, a conservative think tank, informed The Times.

Meta is reportedly seeking the White House’s assistance in its case against the European Union. Executives have urged Trump’s trade officials to persuade European regulators to retract potential penalties tied to a ruling concerning its use of personalized ads, reports The Wall Street Journal. This marks one of the initial significant requests from Meta since CEO Mark Zuckerberg’s effort to mend relations with President Trump in his second term.

OpenAI’s valuation skyrockets to $300 billion after securing its latest funding round. The creator of ChatGPT closed a $40 billion funding round on Monday, positioning it as one of the most valued privately held companies globally, as its active user base surpasses 500 million weekly. This deal also highlights the financial prospects of the lead investor, SoftBank, which reportedly seeks a $16.5 billion loan to fund its A.I. initiatives. Separately, the Microsoft-supported Builder.ai adjusted its revenue forecasts for 2024 downward and has called in auditors to review its financial statements from the past two years.

Johnson & Johnson faces another significant setback with its talcum powder litigation. A federal bankruptcy judge dismissed its proposed $9 billion settlement, which would have resolved ongoing litigation alleging that its product caused cancer. This ruling extends a dispute that has lingered over the company for years, as both a Justice Department bankruptcy trustee and some plaintiffs’ attorneys opposed the settlement.

Harvard has become the latest university scrutinized by the Trump administration, which is now reviewing nearly $9 billion of the institution’s federal grants and contracts, citing concerns over the university’s alleged inadequate handling of antisemitism.

This action comes as research institutions nationwide are racing to secure alternative funding after the administration’s cuts. Critics argue that these actions could inflict long-term damage on the broader economy.

Statistics on President Trump’s threats: Nearly 100 colleges are under investigation by the Trump administration regarding their diversity, equity, and inclusion policies, and their handling of antisemitism, all while these institutions received more than $33 billion in the 2022-2023 academic year, as reported by The Associated Press. This funding constituted approximately 10 to 13 percent of revenue at most schools.

The Trump administration has also effectively stalled grants from the National Institutes of Health, which finances biomedical research, and has attempted to dismiss workers at the National Science Foundation. Notably, Google began as a graduate research initiative at Stanford financially supported by the foundation.

Additionally, Trump has imposed restrictions on “indirect funds” utilized for expenses such as buildings, utilities, and support staff.

How government funding drives American R.&D.: A 2019 analysis found that nearly one-third of patents are reliant on government funding, and a recent paper by the Dallas Fed indicated that government financing in research has accounted for at least a fifth of U.S. productivity growth since World War II.

“This truly jeopardizes the goose that lays the golden egg,” stated Sabrina Howell, an N.Y.U. professor studying the federal government’s role in fostering innovation, in remarks to The Times’s Ben Casselman.

Concerns about artificial intelligence are particularly significant. The emergence of China’s DeepSeek, whose A.I. model competes with Western alternatives but was developed with fewer resources, challenges the assumption that America will maintain its dominance in tech research.

Maintaining America’s lead in A.I. relies on “a symbiotic balance” between federal funding and private investments, according to two researchers from the University of Chicago in a recent opinion piece in Fortune. Disrupting this balance risks adversely affecting the U.S., particularly as “competitors are swiftly gaining momentum with aggressively ramped-up government-funded research programs.”

Other Trump policies could also be deterring research talent. The administration has tightened immigration regulations, recently retracting visas of some students involved in political demonstrations. This overall impact may diminish the U.S.’s appeal to leading international scientists.

Tech companies have expressed ongoing concerns about challenges in bringing in overseas talent: “It’s nearly impossible to recruit talent here,” said Eugenia Kuyda, founder of the A.I. companion startup Replika, during the DealBook Summit in December. She noted that it is significantly more challenging for A.I. scientists to secure visas when applying with those degrees.

The first quarter of 2025 has concluded, and it was a harsh period marked by President Trump’s tariff actions leading to a sell-off in the S&P 500.

Some financial assets that initially surged after November’s Election Day have experienced dramatic declines. This includes Bitcoin (down 12.1 percent in the first quarter), the dollar (down nearly 4 percent against a selection of currencies), and Elon Musk’s Tesla (down nearly 36 percent). The so-called Magnificent Seven group of tech stocks ended the quarter down more than 20 percent from their peak in December.

Conversely, stock indexes in Europe and Asia significantly surpassed their American counterparts. The Hang Seng index jumped nearly 18 percent in the quarter, with its rally intensifying in January following a shake-up in global markets due to DeepSeek, the Chinese chatbot creator.

Meanwhile, Germany’s DAX, the index of blue-chip companies, gained over 10 percent as lawmakers approved a substantial stimulus plan to bolster security in anticipation of Trump potentially reducing America’s commitment to European defense.

President Trump has expressed clear disdain for the CHIPS Act, a bipartisan measure enacted under the Biden administration aimed at boosting domestic semiconductor manufacturing.

Nonetheless, reports indicate that Commerce Secretary Howard Lutnick may withhold federal grants promised under the law as a tactic to stimulate investment in U.S. production — employing it as a negotiating tool. At the same time, he may also seek to expand other components of the legislation.

Lutnick has indicated he may not distribute the subsidies stipulated by the act, as per Bloomberg’s report. The commerce secretary is evaluating the awards allocated under this law. Given that many companies have not achieved the required milestones to qualify for additional funding since Trump took office, Lutnick appears prepared to delay any future payouts.

However, this does not necessarily imply that Trump and Lutnick are forsaking the CHIPS Act. On Monday, the president signed an executive order establishing the United States Investment Accelerator, an office within the Commerce Department tasked with overseeing the CHIPS Act to facilitate investments exceeding $1 billion in the U.S.

The intention is to negotiate “far better deals than those made by the previous administration” by minimizing red tape and fostering collaboration with national laboratories (even as the White House targets the core of American research institutions).

This could entail extending the CHIPS Act’s provision for 25 percent tax credits, according to Bloomberg. For many companies, these tax incentives are more beneficial than the act’s grants, mainly because they are not subject to the same environmental or labor requirements tied to the subsidies.

“The credit is crucial,” remarked Peter Cleveland, a senior vice president at the Taiwanese chip behemoth TSMC, last week as reported by Bloomberg. Building a robust domestic chip manufacturing base necessitates collaboration between Washington and the private sector — “and the nature of that partnership,” he asserted, “should be through the extension of the credit in the tax code.”

There’s a caveat: Any substantial alterations to the tax credit component would require congressional authorization.

The net outcome: The CHIPS Act could persist in some shape or form. “This rebranding offers the president a framework to endorse the underlying policy while previously criticizing the CHIPS Act,” remarked Jim Secreto, a Commerce Department official during the Biden administration, to Bloomberg.

Deals

  • Rocket Companies, a prominent mortgage giant, has agreed to acquire rival Mr. Cooper for $9.4 billion in stock. (AP)

  • Circle, which is responsible for the U.S.D.C. stablecoin, is reportedly collaborating with JPMorgan Chase and Citigroup on a potential I.P.O. (Fortune)

  • Hooters, the well-known restaurant chain, has filed for bankruptcy protection as part of a strategy to sell its company-owned outlets to a consortium backed by its founders. (Reuters)

Politics, policy and regulation

  • Kyrsten Sinema, the former independent senator from Arizona, has been hired by the law and lobbying firm Hogan Lovells to provide guidance to clients on Washington policy. (Politico)

  • Several consultancy firms have reportedly proposed billions in cost reductions to the Trump administration to secure their federal contracts. (FT)

  • President Trump, alongside musician Kid Rock, signed an executive order targeting what he described as exploitative practices by ticket brokers. (WSJ)

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