US-China tariff pause is good news, needs context

The Trump administration and the Chinese government announced a 90-day tariff reduction. While this is good news, it deserves context.

The risk of recession is still real. The economy already shrank last quarter. That was before the Liberation Day tariffs were announced on April 2, at the beginning of this quarter. That quarter is already almost halfway over, and it has proceeded under crippling Great Depression-era tariff rates, both against China and nearly every other country.

While the UK and China deals, plus any others that are announced soon, might reduce those tariffs on net, Trump’s tariff binge has already done significant damage to the economy.

Shortages can still happen, because shipping works on a lag. Ships take weeks to cross the Pacific, so there is a lag time between Trump’s tariff changes and when they show up on US shores. Last week was when port traffic significantly slowed on the West Coast, with Gulf of Mexico and East Coast ports up next. That will in turn slow down trucking shipments, and finally show up on bare store shelves.

Even if shipping instantly revives to previous levels, that lag time means that shortages could last at least a month. For as long as that supply crunch lasts, prices for some items may go up even more before they go back down. Even then, prices may remain higher than before because of remaining tariffs.

US businesses could feel lasting pain. Shortages could affect consumers for most of the rest of this quarter, but the harms already done to US businesses could last longer.

Roughly 60 percent of Chinese imports are capital goods that US businesses use. These include components, machinery, and raw materials that go into American-made products. Businesses, especially smaller ones, are dealing with combinations of higher input costs, tighter margins, slumping sales due to having to charge higher prices, and unavailable parts. Even if they can find parts elsewhere, the time spent scrambling to find them is time not spent on their core businesses.

China tariffs are still higher than before the agreement. China tariffs will remain at 30 percent for the pause. That is still higher than they were when Trump’s second term began. This is important context that should limit the amount of relief people feel. We are not back to where we were before. Tariffs are still higher than they were at any point in Trump’s first term. Overall US tariff burdens remain among the developed world’s highest.

It is a 90-day pause, not a permanent reduction. If the US and China do nothing, we’ll be right back to 145 percent tariffs in August. Both sides have been temperamental with each other since Trump’s first term, which featured four rounds of back-and-forth tariffs. Even those peaked at levels still below the current pause’s 30 percent rate. If either side does something to upset the other, this pause may be shorter than 90 days.

The main reason behind the pause has more to do with the fact that 145 percent tariffs are unsustainable than anything else. Trump has not suddenly stopped loving tariffs. Nor has Beijing’s instinct for matching bad US policy with its own bad policy gone away.

Businesses still have no policy certainty around which to plan. Nobody knows what will happen in 90 days. About two months remain on the other major Liberation Day reciprocal tariffs currently on pause. Not even the president knows what will happen with those, let alone businesses trying to map out their supply chain decisions over the next several years. For some businesses, this uncertainty is worse than the tariffs themselves.

It is time to take away the president’s tariff powers. The US Constitution gives all taxing power to Congress, and none to the president. It is time to go back to that. Slow and unstable growth will continue until Congress and the courts place tariff-making power back into the legislature, where it belongs. Trump will continue zigging and zagging on tariff policy for as long as the other two branches of government continue to delegate it.

Something has to give. So far, it’s been the economy. It should instead be overgrown presidential power.