For the past week, President Trump has been urging calm in the face of the financial chaos that he created and resisting calls for him to rethink his approach.
“I know what the hell I’m doing,” he told Republicans on Tuesday as the massive tariffs he had imposed sent global markets into a tailspin. “BE COOL!” he said in a social media post on Wednesday morning. “Everything is going to work out well.”
At 9:37 a.m. Wednesday, the president was still bullish on his policy, posting on Truth Social: “THIS IS A GREAT TIME TO BUY!!!”
But in the end, it was the markets that got him to reverse course.
The economic turmoil, particularly a rapid rise in government bond yields, caused Mr. Trump to blink on Wednesday afternoon and pause his “reciprocal” tariffs for most countries for the next 90 days, according to four people with direct knowledge of the president’s decision.
Asked to explain the decision, Mr. Trump told reporters: “Well, I thought that people were jumping a little bit out of line. They were getting yippy, you know, they were getting a little bit yippy, a little bit afraid.”
Behind the scenes, senior members of Mr. Trump’s team had feared a financial panic that could spiral out of control and potentially devastate the economy. Treasury Secretary Scott Bessent and others on the president’s team, including Vice President JD Vance, had been pushing for a more structured approach to the trade conflict that would focus on isolating China as the worst actor while still sending a broader message that Mr. Trump was serious about cracking down on trade imbalances.
After his reversal on social media, Mr. Trump’s team was put in the unenviable position of trying to spin the media that this was the plan all along, a brilliant strategy straight out of the pages of the president’s best-selling book, “The Art of the Deal.” Mr. Bessent went so far as to deny that the bond market had driven the change.
When Mr. Trump came out to explain his decision on Wednesday, however, he undercut both Mr. Bessent and Karoline Leavitt, the White House press secretary, citing the jittery market and saying he was acting “instinctively, more than anything else.”
Many of Mr. Trump’s most senior advisers and officials were unaware of this major shift in policy until the last minute, because as recently as Wednesday morning Mr. Trump was still indicating he was sticking to his previous plan.
Jamieson Greer, the U.S. trade representative, only learned of Mr. Trump’s decision while defending the original tariffs before a House committee, a person familiar with the situation said.
Mr. Bessent played a significant role in steering the president toward the pause. But the real credit, Mr. Trump’s advisers admit privately, should go to the bond markets. Mr. Trump’s decision was driven by fear that his tariffs gamble could quickly turn into a financial crisis. And unlike the two previous crashes of the past 20 years — the global financial crisis of 2008 and the pandemic of 2020 — this crisis would have been directly attributable to only one man.
Market Meltdown
The day Mr. Trump announced his plan for sweeping tariffs, he promised to “make America wealthy again.”
But the details of the plan and its goals remained foggy. In the run-up to the tariff announcement last week, Mr. Trump’s economic team debated until the last minute about what form the tariffs should take, with Mr. Bessent and Commerce Secretary Howard Lutnick both privately arguing for more limited tariffs, according to two people familiar with the plans.
Peter Navarro, the White House trade adviser, was the most aggressive of Mr. Trump’s advisers, insisting on a tariff strategy that he claimed would create a revolution in American manufacturing. The Office of the U.S. Trade Representative came up with its own formula for calculating tariff rates for other countries, based on their tariff rates plus an estimate of other trade barriers. But the president ultimately decided to go with a formula based on the trade deficit, two people familiar with the conversations said.
When the tariffs finally were announced last Wednesday, the markets tanked.
By Sunday, Mr. Bessent decided that he needed a private audience with the president. In less than 24 hours, the markets would reopen and investors were predicting a “Black Monday.”
Mr. Bessent rode with Mr. Trump back to Washington on Air Force One. During the flight, Mr. Bessent advised the president to focus on negotiating with other countries, saying Mr. Trump is the most deft negotiator there is, four people briefed on the discussion said. But he also stressed that Mr. Trump needed to articulate the endgame of his plan because the markets needed more certainty.
Mr. Trump pushed back, the people said, emphasizing the pain was “short term,” one of the people said. But Mr. Bessent said that could mean many months in market terms.
The president apparently absorbed only part of the message. On Monday morning, he drafted a Truth Social post to say “talks” were going to take place with countries; he changed it to say that they would “negotiate.”
By Monday afternoon, he told reporters: “Virtually every country wants to negotiate.”
But there was still no coherent expression about the endgame: Did the president want to use the levies as a negotiating tactic to cut better deals for the United States? Or was he intent on leaving them in place as a blunt instrument to raise revenues and force manufacturing back to the United States?
Looking for Clarity
Although Mr. Trump’s strategy for the tariffs was still unclear, that he would move aggressively to impose them should not have been a surprise.
Mr. Trump campaigned on putting in place a universal base line tariff, and his advisers made clear that the president would follow his instincts after a first term in which Mr. Trump believed his advisers tried to block him at every turn.
Taking office for a second time, Mr. Trump has told advisers that he wants to do it his way this time. He has surrounded himself with advisers who are believers in his instincts and he has said repeatedly that he views tariffs as the tool to rescue the economy from foreign countries that have taken advantage of the United States for decades.
Investors, Wall Street executives and major donors convinced themselves either that Mr. Trump was bluffing, or would be talked out of his most aggressive tariff proposals. Some of his advisers tried. Mr. Lutnick argued for exemptions for the auto industry almost immediately. Others wanted exemptions for goods that aren’t sufficiently produced in the United States, such as coffee.
Meanwhile, economists were warning that stiff tariffs, by raising the prices of imported goods, would badly undercut another campaign promise: that Mr. Trump would bring down inflation.
But Mr. Trump has a theory on tariffs that has been hardened over 40 years, one that’s frozen in place and is resistant to data that conflicts with his gut. Over many years, when he has been presented with statistics that don’t comport with his instincts, he demands that people find him alternative information that backs up his beliefs.
So he plowed ahead, even while his advisers found themselves struggling to communicate to the public about a policy that they didn’t fully understand. Aides held multiple meetings with Mr. Trump and his senior advisers to try to find a way to convince the public that the economic penalties were a good idea.
For a while, the tariffs created a dynamic Mr. Trump most enjoys — global leaders coming to him and, as he said on Tuesday night, “kissing my ass” in search of deals. Administration officials said that more than 75 countries had reached out to them.
But the warning signs became too severe to ignore.
Reversing Course
On Wednesday morning, Mr. Trump encouraged Americans to buy stocks and urged companies to move to the United States. It was not clear, at that point, that hours later he would abruptly change course and place a 90-day pause on many of the tariffs. The financial markets soared after the reversal, leaving questions about whether Mr. Trump’s earlier recommendation of a buying opportunity amounted to a signal that some investors might have used to cash in on the sharp rise in stock prices.
But soon after Mr. Trump posted his missive on social media, he met in the Oval Office with Mr. Bessent, Mr. Lutnick and Kevin Hassett, the director of the National Economic Council. They discussed with the president the 10-year Treasury yield, emphasizing concern about the health of the broader U.S. financial system. Mr. Trump, in particular, understood what the rise in bond yields would mean for banks and their long-term lending, a topic he understands intimately from his years running a real estate company.
The tariffs had triggered a sharp sell-off in U.S. government bond markets and the dollar, which investors usually see as safe-haven assets in times of turmoil. After Mr. Trump announced the new tariffs last week, economists on Wall Street quickly raised their forecasts for inflation and lowered those for growth, with many warnings about a recession. Trillions of dollars of stock market value vanished in a matter of days.
At 1:18 p.m. on Wednesday, Mr. Trump announced on Truth Social that he would back off the “reciprocal” tariffs for 90 days while increasing tariffs on China to 125 percent. The pause, along with leaving a 10 percent tariff rate in place for most countries, was a version of what a number of people had urged Mr. Trump to put in place for days.
Speaking with reporters soon after Mr. Trump announced the reversal, Mr. Bessent and Ms. Leavitt both tried to create the impression that this was the culmination of a carefully laid plan — to isolate China as the main culprit inflicting pain on American workers.
“This was his strategy all along,” Mr. Bessent said.
Ms. Leavitt, the White House press secretary, tried to frame the policy backflip as a work of negotiation genius.
“Many of you in the media clearly missed the ‘Art of the Deal,’ you clearly failed to see what President Trump is doing here,” she said. “You tried to say that the rest of the world would be moved closer to China, when in fact, we’ve seen the opposite effect. The entire world is calling the United States of America, not China, because they need our markets, they need our consumers, and they need this president in the Oval Office to talk to them, and that’s exactly why more than 75 countries have called.”
Mr. Trump’s senior adviser, Stephen Miller, took the retrofitting to another level on X: “You have been watching the greatest economic master strategy from an American President in history.”
Mr. Bessent claimed the 90-day pause was Mr. Trump’s idea and insisted the decision had nothing to do with trillions of dollars of U.S. wealth being wiped out of the stock market after the president’s tariff announcement last week.
“I have nothing that says that, and we actually had quite a good 10-year auction today,” he told reporters when asked how much the president’s decision was driven by the U.S. bond sell-off and whether China was dumping its vast holdings of U.S. Treasury bonds.
Mr. Bessent said the president was pausing the tariffs because the administration was receiving so many requests to negotiate, and each negotiation would be “bespoke” and therefore “take some time.”
The Treasury secretary did not respond directly to a question about why investors would trust that this was the final word from Mr. Trump after so many changes.
Mr. Trump’s actions cover only the next 90 days. As for any additional tariff exemptions, the president refused to give the clarity many investors are seeking.
Asked on Wednesday how he would decide on any further exemptions, Mr. Trump said: “Instinctively, more than anything else. I mean, you almost can’t take a pencil to paper. It’s really more of an instinct, I think, than anything else.”