Despite Trump’s Pause, the Tariffs in Place Can Still Do Economic Damage

While President Donald Trump gave most countries a 90-day reprieve from the most extreme tariffs, a base 10% tariff is still far higher than the previous U.S. trade strategy.

On Wednesday afternoon, President Donald Trump said he would pause “reciprocal” tariffs that varied by country based on their trade deficit with the U.S. In their place, Trump instated a 10% universal tariff on most countries, including Mexico and Canada. Trump also increased tariffs on Chinese goods, levying a 125% tax.

The pause made traders more optimistic as the Dow Jones Industrial Average jumped more than 2,500 immediately following the announcement. The S&P 500 and tech-heavy Nasdaq Composite surged 8% and 10%, respectively, recouping a chunk of the losses the major indexes posted since Trump unveiled the “reciprocal” tariffs a week ago.

However, 10% tariffs can still increase inflation and slow growth, economists said.

Ernie Tedeschi, director of economics at the Yale Budget Lab and former chief economist at the White House Council of Economic Advisers, said in a post on social media platform X that not much has changed.

Before the tariffs were rolled back, analysts at Citi said that implementation of the policies, even for a short period of time, would have an impact.

“Even if tariffs with some countries are reduced rapidly, stickiness of other tariffs and continued uncertainty will leave an imprint on the U.S. economic data,” they wrote.

The lingering tariffs on China will still require supply chain shakeups, other economists, including KPMG’s Chief Diane Swonk, said.