The Tariff Roller Coaster Is Playing Tricks on You

It sure feels like President Trump has reduced tariffs. The recent China deal cut tariff rates from 145 percent to 30 percent, and de minimis tariffs on Chinese products are lowering from 120 percent to 54 percent. Trump previously cut many of his Liberation Day reciprocal tariff rates from higher than 40 percent on countries like Vietnam and Cambodia down to 10 percent. He also offered exemptions for some cars and electronics. The recent U.K. deal capped most tariffs at 10 percent. Despite those cuts, the tariff rates Americans are set to pay have increased more than sevenfold since Trump took office. So why doesn’t it feel that way?

The “anchor heuristic” helps explain why. This is a time-tested negotiating tactic that plays a major yet overlooked role in shaping the public’s perception of President Trump’s fluctuating tariff rates. You may have been had and not even know it.

What is the anchor heuristic? It is throwing out a number at the beginning of a negotiation. People then naturally tend to use that as an anchor point to use for comparing other numbers.

The person making the first offer can set any anchor number they want, even a ridiculous one, and this can influence how negotiations go. It’s a quirk of the human brain, and people can take advantage of it for good or ill.

The word “heuristic” is the fancy term for “rule of thumb.” Rational thought takes effort, and the human brain has evolved all kinds of heuristics to conserve resources. While this saved time and calories in lean hunter-gatherer times, heuristics don’t always serve us well in modern times.

For example, the anchor heuristic is a common deceptive advertising tactic. Think of an infomercial that advertises a new product for $100. Seconds later, they reduce the price to $70, a 30 percent discount. That sounds much more reasonable, even if $100 was never a realistic option. Then they cut the price again to $50 and throw in some accessories, too. What a fantastic deal, especially compared to that $100 anchor.

Maybe it really is a good deal, and maybe it isn’t. But that initial $100 offer has nothing to do with whether it is or isn’t. Yet we still use $100 as a basis for comparison. It became the anchor our brains latched onto, not because of the merits, but because that was the first number introduced.

Though, perhaps unsurprisingly, he doesn’t use the term, Trump describes the anchor heuristic in The Art of the Deal, and he may well be using it now in tariff negotiations.

In the weekend before the U.S.-China agreement was announced, Trump said on social media that the then-145 percent tariff rates might come down to 80 percent. When the deal was announced, the final number ended up at 30 percent. Treasury Secretary Scott Bessent even included some nice-sounding accessories, such as more agricultural exports and access to rare earth metals. An unbeatable deal, surely.

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