During his so-called Liberation Day speech back in April, President Donald Trump unveiled his expansive new tariff policy — including reciprocal tariffs on some 90 countries — and declared it the rebirth of American industry.
Yet, just seven days and a global market crash later, Trump paused his reciprocal tariffs.
So there is historical precedent for what the Wall Street Journal recently called the Trump administration’s “tiptoeing away” from its tariff strategy. (1) This follows an executive order in September that exempts “products that cannot be grown, mined, or naturally produced in the United States or grown, mined, or naturally produced in sufficient quantities in the United States to satisfy domestic demand.”
The exemptions, which are subject to inking new trade deals with the exporting countries, include “certain agricultural products; aircraft and aircraft parts; and non-patented articles for use in pharmaceutical applications.” The WSJ adds that the decision “reflects a growing sentiment” within the administration “that the U.S. should lower levies on goods that it doesn’t domestically produce.”
Must Read
- Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don’t have to deal with tenants or fix freezers. Here’s how
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and 3 simple steps to fix it ASAP
- ‘Rich Dad, Poor Dad’ author Robert Kiyosaki says this 1 asset will surge 400% in a year — and he begs investors not to miss its ‘explosion’
Ron Insana, a CNBC senior analyst, told The 11th Hour that he’s “a little surprised” that Trump is backing off some tariffs, but added that “it recognizes the fact that we don’t grow vanilla in the United States, or bananas, or coffee beans … I don’t think this was ever thought through.” (2)
So is Trump actually quietly quitting tariffs, or is there another reason for the recent walking back of one of his signature policies?
Tariff turnaround, or just a shift in strategy?
If Trump is indeed slowly retreating from his tariff strategy, it’s easy to see why.
An S&P Global Marketplace study, released earlier this month, shows companies took an additional $1.2 trillion hit to revenue beyond what they anticipated at the beginning of the year, (3) while ABC News reported that Goldman Sachs recently told clients that American consumers will pay 55% of the cost of tariffs — a number that, they warn, could jump to 70% in a year’s time. (4)
As well, the erratic tariff strategy and other prohibitive White House policies are stalling the potential reshoring of manufacturing — precisely the issue it was meant to resolve — with “several U.S. business leaders” telling Politico that it’s all had “a paralytic effect, with companies unable to greenlight reshoring projects without more certainty.” (5) Meanwhile, a dozen American small businesses recently told CNBC that they are barely treading water. (6)
All of which explains why Trump’s tariffs consistently poll terribly, not to mention his handling of the economy — supposedly his strong suit — which now sits at only 36% approval. (7)
And yet, some say that Trump’s perceived tariff retreat isn’t likely out of concern for the impact on businesses or American pocketbooks but, rather, tied to a looming U.S. Supreme Court battle due to start Nov. 5.
That battle concerns whether Trump’s reciprocal tariffs are legal under the International Emergency Economic Powers Act (IEEPA). Essentially, as Robert Goulder, contributing editor for Tax Notes Today International, told Forbes, these are Trump’s country-specific tariffs being challenged, as opposed to tariffs on specific items or products. (8)
Which is probably why Trump’s most recent tariffs — on everything from trucks and buses to lumber and “wood products” — lean on Section 232 of the Trade Expansion Act of 1962 for justification.
Goulder explained that Section 232 is based on the idea “that there is in fact a national security threat as to certain categories of imports.” He used steel and aluminum as an example of tariffs that could stay in place under Section 232 because “if there were to be a war, you’d need metal to make battleships and guns and whatnot.”
This is a major reason that some, including WSJ trade and economic reporter Gavin Bade, believe that Trump is not necessarily folding on tariffs, but rather “shifting the emphasis away from the reciprocal tariffs somewhat and toward the Section 232 national security tariffs.” (9)
That way, even if the Supreme Court upholds the verdicts of lower courts that found Trump’s reciprocal tariffs to be illegal — and thus force him to pay back the billions of dollars he raked in with them — Section 232-based tariffs are more likely to stand up to legal scrutiny going forward.
Still, Trump warned that overturning his tariffs would bring the U.S. to “the brink of economic catastrophe.” (10)
Others aren’t quite as dramatic, though Goulder did say that long-term, based on 10-year tariff revenue projections, “there’s a $2 trillion revenue hole in the federal budget if the Supreme Court upholds the lower courts here.”
Read more: How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
How the Supreme Court decision could affect consumers
Politico reports that Trump’s tariffs have so far netted about $200 billion. (11) A chunk of that tariff profit comes from reciprocal tariffs, and we already know that the bulk of the cost of tariffs is being passed onto the American consumer. So it should stand to reason that, if the Supreme Court overturns Trump’s reciprocal tariffs, the American consumer should be in line for a piece of the billion-dollar refund. Right?
Sadly, that’s unlikely.
Goulder explained to Forbes that despite the cost of tariffs being passed onto consumers, “there’s no recovery for that … Consumers don’t have a cause of action.”
Instead, he noted, “the only people who are entitled to a tariff refund is the importer who actually paid the tariff up front,” while “prices are just higher, and that’s how it is.”
Other experts agree that it’s unlikely, even if the reciprocal tariffs are overturned, consumers will see retailers lower prices in the short term.
Instead, Rohit Tripathi, a vice-president at supply chain and retail strategies company Relex Solutions, told USA Today that the costs of tariffs have already been absorbed and passed along, and that it could be more than a year after a Supreme Court overturning before prices begin to come down. (12) It’s widely expected that the Supreme Court will make its ruling in early 2026.
That said, there could be some good news on the horizon.
According to a recent Tax Foundation analysis, Trump’s reciprocal tariffs would increase taxes on U.S. households by $1,300 in 2025 and $1,600 in 2026. (13) But if they’re overturned, those amounts drop to $300 this year and $400 next year.
What to read next
- Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
- I’m 49 years old and have nothing saved for retirement — what should I do? Don’t panic. Here are 6 of the easiest ways you can catch up (and fast)
- There’s still a 35% chance of a recession hitting the American economy this year — protect your retirement savings with these 5 essential money moves ASAP
- This tiny hot Costco item has skyrocketed 74% in price in under 2 years — but now the retail giant is restricting purchase. Here’s how to buy the coveted asset in bulk
Join 200,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Wall Street Journal (1); CNBC (2); S&P Global Marketplace (3); ABC News (4); Politico (5); CNBC (6); Newsweek (7); Forbes (8); Wall Street Journal (9); The Associated Press (10); Politico (11); USA Today (12); Tax Foundation (13)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.