How far will Donald Trump take his trade war?

Good morning and welcome to White House Watch. Suit up for our tariff deep dive — and don’t forget your oxygen tank so you can keep breathing:

• The latest tariff chaos

• Bourbon levies

• Unhappy billionaires

We’re moving closer to a full-blown trade war after China vowed to “fight to the end” if Donald Trump pressed ahead with his threat to ratchet up tariffs again on the world’s second-largest economy.

Yesterday, the US president said he’d impose an additional 50 per cent tariff on Chinese imports if Beijing didn’t remove its retaliatory tariff today. That would bring levies on Chinese imports to more than 120 per cent, heaping pressure on American companies with Chinese suppliers.

In the Oval Office yesterday, Trump defended his draconian trade policy, despite the market turmoil:

I don’t mind going through it, because I see a beautiful picture at the end. Countries that really took advantage of us are now saying ‘please negotiate’.

We’re going to have to reset the table on trade. And when we do, we’re going to come out unbelievably well.

Wall Street stocks rode a rollercoaster yesterday as an anonymous X account falsely claimed that there would be a 90-day tariff pause. All three major indices briefly turned positive before the White House denied it and sent stocks back down. US government debt sold off sharply, too, as hedge funds cut back on risk in their portfolios and investors continued shifting into cash.

Trump said “we’re not looking” to pause tariffs to allow for negotiations, but “many countries” were reaching out to negotiate with US officials. “We’re going to get fair deals and good deals with every country, and if we don’t, we’re going to have nothing to do with them,” Trump said.

Amid the tumult, Federal Reserve chair Jay Powell has an unenviable dilemma: defend the economy (by cutting interest rates to help prevent an economic slowdown) or contain inflation (by keeping rates up to pre-empt a new burst of high prices). 

Meanwhile, companies are on the hunt for creative ways to cut the customs value of their imports to the US in an effort to blunt the financial impact of the tariffs, and large institutional investors are studying options to shed stakes in illiquid private equity funds.

Global stocks regained some ground this morning, and US futures are up more than 2 per cent. Follow today’s market moves with our live blog.

The latest headlines

• Fox News, the go-to news outlet for conservative Americans — has largely downplayed the fallout from Trump’s tariffs.

• The EU dropped bourbon from its retaliatory tariff list against the US after heavy lobbying from France, Italy and Ireland, which want to shield their alcohol industries.

• Trade experts are warning that rejigging global supply chains to exploit varying tariff levels would not be easy. 

• Trump said the US would hold direct “high level” talks with Iran about curtailing Tehran’s nuclear programme on Saturday.

• US advocacy groups and small legal offices fear Big Law will retreat from civil rights cases as Trump’s executive orders put pressure on firms to choose between ethics and profits.

• Defence secretary Pete Hegseth is in Panama as Washington increases pressure on the Central American nation for alleged Chinese influence over its canal.

What we’re hearing

Billionaire financiers, including some of Trump’s allies, are lambasting the president’s tariffs as they reel from the market turmoil.

Ken Langone, the co-founder of Home Depot and a longtime Republican donor, told the FT’s Alex Rogers and James Fontanella-Khan that Trump’s levies had been set too high and implemented too quickly:

“I believe he’s been poorly advised by his advisers about this trade situation — and the formula they’re applying.”

He also called the 46 per cent tariff on Vietnam “bullshit” and said the 34 per cent additional levies on China were “too aggressive, too soon” and didn’t give “serious negotiations a chance to work”.

Billionaire hedge fund manager Bill Ackman, who backed Trump’s 2024 campaign, called the tariffs “a major policy error” that he had earlier said was akin to “launch[ing] economic nuclear war on every country in the world”.

He alleged on Sunday that commerce secretary Howard Lutnick and his company Cantor Fitzgerald would profit “when our economy implodes”, before backtracking yesterday. Shares in Ackman’s main fund, Pershing Square Holdings, have fallen 15 per cent this year as the trade war hits his portfolio. 

Stanley Druckenmiller, a billionaire and mentor to Treasury secretary Scott Bessent, posted over the weekend: “I do not support tariffs exceeding 10%.”

In his annual letter to shareholders yesterday, JPMorgan Chase chief executive Jamie Dimon also criticised the duties, saying “the quicker this issue is resolved, the better because some of the negative effects increase cumulatively over time and would be hard to reverse”, though he avoided writing anything too incendiary.

Viewpoints

• Peter Navarro, a top Trump trade adviser, asserted that Trump’s reciprocal tariff doctrine would fix a broken international trade system. 

• Markets columnist Katie Martin warns that US markets could get much worse, quickly, and might lead Wall Street into “self-reinforcing doom loops”.

• If an online rumour can push a bear market into bull recovery so quickly, then “Trump has the world in his palm”, writes Edward Luce.

• Tej Parikh lays out why Trump’s tariffs may not last long, predicting that they might not be able to withstand the pressure.

• Even if Trump lowered tariffs, there would still be “extremely high trade policy uncertainty” — and uncertainty is itself a sort of tariff, according to former chair of the White House economic council Jason Furman.