Why Did Trump Reverse Course on Tariffs? Economic Recession or U.S. Bond Storm Too Much to Bear?

TradingKey - In less than 24 hours, U.S. President Donald Trump reversed course on his newly implemented tariff policy, announcing a 90-day suspension of reciprocal tariffs for selected countries. Analysts attribute the sudden policy U-turn to mounting pressure from plunging stock markets, bond market instability, growing fears of a recession, and widespread public and political resistance.

On the afternoon of April 9, Trump declared via the social media platform Truth Social that he had authorized a 90-day tariff suspension of tariffs for countries that chose not to retaliate. This sweeping tariff measure, which imposed rates ranging from 20% to 49% on dozens of nations worldwide, had only come into effect earlier that same day.

Analysts noted that the move was likely prompted by the volatility in capital markets, increasingly pessimistic economic forecasts from leading economists, rising public opposition, and the waning influence of hawkish trade advisor Peter Navarro —all contributing factors to Trump’s dramatic policy reversal.

Focus on Capital Markets

Since the beginning of the week, a selloff in U.S. Treasury—sparked by complex "basis trades"—has rattled Wall Street, sending the 10-year Treasury yield soaring 40 basis points in just two days. Economists have bluntly warned of an impending "Treasury storm."

On April 9, President Trump said he had been closely monitoring the bond market, describing it as "very tricky," and acknowledged growing unease among investors. 

 "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,"  Trump remarked.

He added that he had been contemplating a suspension of the tariff measures over the past few days and finalized the decision on Wednesday afternoon.

An analyst at a major asset management firm noted that Trump’s policy shift reflects his sensitivity to market signals and a recognition that his initial move may have overstepped.

Jamie Dimon’s Influence

Before making the decision, Trump watched an interview with JPMorgan Chase CEO Jamie Dimon, which is considered a pivotal moment in the tariff policy reversal.

Dimon acknowledged that global trade does involve unfair practices but encouraged policymakers to take a calm approach and engage in trade negotiations. He also warned that Trump’s tariff policies could lead to a recession, as businesses were cutting spending due to uncertainty.

Following this, Trump posted on social media, stating, "BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!"

Resistance Mounts, Hawkish Influence Wanes

Trump’s tariff policy faced fierce opposition not only from trading partners and Democrats but also from within the Republican Party. Recently, lobbying groups and business leaders, including Tesla CEO Elon Musk, publicly challenged Trump, urging him to reconsider his trade policies.

According to the Financial Times, Peter Navarro, a staunch trade skeptic, appears to have lost some of his influence, while Treasury Secretary Bessent’s sway has grown.

A source revealed that Bessent helped Trump gradually accept the idea that the U.S. should suspend tariff increases for friendly nations.