Trump doesn’t know what he wants

Why is Donald Trump doing this shock and awe on tariffs? Is it because he wants the tariffs? Or because he wants to use them to force deals—and extract payments—from friends and foes alike?

He seems to want both.

On the one hand, Trump constantly harks back to a supposedly “golden age” of America before the First World War, when tariffs reigned and there was no income tax.

“When we were a smart country, in the 1890s… this is when the country was relatively the richest it ever was, it had all tariffs, it didn’t have an income tax,” he said when asked at an election rally whether it would be possible to jettison the federal income tax. “Now we have income taxes, and we have people that are dying. They’re paying tax, and they don’t have the money to pay the tax.” A few days later, when podcaster Joe Rogan asked whether he was serious about replacing federal income taxes with tariffs, Trump replied: “Yeah, sure, why not?”

About half of US federal revenue comes from income taxes, while barely 2 per cent comes from tariffs. So huge tariffs would be needed to bring about even a modest cut in income taxes.

On cue, Trump has been announcing or threatening tariffs which are indeed very large. Tariffs of 25 per cent across the board were initially levied against neighbours Mexico and Canada, with threats of even larger numbers if they retaliated. Ten per cent for China has gone ahead, while he repeatedly suggests tariffs against the EU. Starmer is holding his breath that the UK may get off lightly.

But maybe what Trump really wants is a deal. The Canadian and Mexican tariffs were almost immediately suspended to give space for negotiations on border security and market access, and pushing for higher European defence spending is a constant refrain of Trump’s.

Last weekend’s drama in Canada left no doubt that big Trump tariffs will bring about big retaliation as a matter of national pride, whatever the mutually assured economic destruction. It is hard to see today’s “western alliance” surviving a serious trade war between the US and fellow members of Nato. At best it will be seriously weakened, at worst it will disintegrate. Trump himself blows hot and cold over Nato and America’s other defence alliances, but he knows that his scope to cut deals with Vladimir Putin and Xi Jinping will be undermined without allies.

Furthermore, it is pretty clear that most of Trump’s own team are in the “deal” camp. Virtually all his economic team are strong free traders by background, particularly Scott Bessent, his treasury secretary. Elon Musk has been unusually silent on the tariff issue, no doubt because of its potential impact on his own Tesla and space exploration businesses.

So which is it to be, tariffs or deals? Trump being Trump, he probably isn’t sure himself. He is winging it, playing for tricks with immensely high stakes. But we will know in 30 days—the time he has given his negotiators to see whether there is the basis for further suspending his Mexican and Canadian tariffs. If he wants the tariffs, he won’t look to get trapped in lengthy negotiations. This is his moment of maximum power.