WHAT'S TRUMP REALLY DOING WITH TARIFFS?

What's Trump Really Doing with Tariffs? By Xenia Wickett

What is President Trump trying to achieve with his tariffs? Until we answer that, it’s hard for governments or businesses to know how to respond—or how to get the tariffs lifted.

Here's what I’m hearing.

What’s the Rationale? Four Possibilities

The first is strategic: to reduce global tariffs to zero. By raising US tariffs, he increases pressure on others to negotiate them down. It's a confrontational starting point, but one that Trump has articulated since the 1980s. He sees the US as having long accepted an unfair deal and believes that only through blunt force will others shift.

The second rationale is economic nationalism: bringing manufacturing and investment back to the United States. This appears to be having some effect - companies such as SoftBank, TSMC, Apple and Nvidia have made major investment pledges (at least $100 billion). However, as the FT noted earlier this week, whether these pledges will materialise is unclear given the disruption the tariffs are already causing. It’s also difficult to square this logic with the imposition of tariffs on countries like Bangladesh or Vietnam. Trump surely doesn’t expect garment production to return to the US. But politically, the message of reshoring and punishing offshoring continues to resonate domestically.

Third, tariffs as a tool of geopolitical leverage. The US remains the world’s largest economy, and in Trump’s framing, that position entitles Washington to impose costs to secure potentially unrelated strategic goals—such as higher defence spending in Europe or influence over infrastructure projects in Panama. In this logic, trade is a tool to extract concessions.

Finally, Trump sees tariffs as a corrective—a way to "right the wrongs" of what he views as decades of American weakness or naïveté. Trump’s narrative is rooted in grievance—a belief that the US has been systematically exploited and that it’s time to rebalance.

Why does Understanding the Rationale Matter?

If you’re a government or company trying to respond, it’s crucial to understand which of these logics is driving the policy. Otherwise, you can’t give him what he wants—and the tariffs won’t be lifted.

The evidence suggests that, at least early on, it was about jobs and fairness. But Trump has been talking about zero tariffs since the 1980s, so maybe this is more ideological than it looks. And once you start slapping tariffs on smaller nations without major manufacturing ties to the US, the argument about “bringing back jobs” weakens. It begins to look more like a strategy of disruption, of emphasizing US power to the world.

The uncertainty also has a leverage all of its own. It leaves countries and companies in reactive mode. Forty-plus governments have opened negotiations, but we have yet to see how they might bear fruit. Meanwhile, despite the investment promises by foreign companies like SoftBank, their national homes (in this case Japan) still face tariffs.

What next?

It is important to note that while Trump may set the policy, he doesn’t control the reaction. US voters and businesses may not be so tolerant if costs continue to rise along with inflation. Tariffs will feed through into higher prices, pressure on supply chains, and uncertainty in investment decisions, causing additional costs for consumers and businesses. And while foreign countries may negotiate in some areas, in others they’re retaliating (notably Europe and China). Not everyone will play by Trump’s script.

So, what do you do when the rationale is unclear, and the rules keep shifting?

While in India last month, I heard a memorable point being made about the new US administration. A leader from the Global South (or Middle if you prefer) noted that this is nothing new. They’ve long been treated with disinterest and distain. And they’ve learned to be agile in response. To have a mindset of flexibility, adaptability, and diversification. And to get on with the world they know rather than the one they want.

Over the coming years, with the US as unpredictable as it appears to be right now, it is inevitable that businesses and governments are going to work to reduce dependence on its market. Diversifying supply chains and customer bases won’t eliminate US influence - it is after all the largest economy in the world - but it will reduce the leverage Washington can wield unilaterally.

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