BAKU, Azerbaijan, July 19. Donald Trump’s return to the White House in January 2025 has triggered what may be the most aggressive trade offensive in modern economic history. With a sweeping new wave of tariffs, the president has redefined the contours of global commerce — and reignited fierce debate from Washington to Beijing. But behind this bold push lies a contradiction: Trump is positioning himself both as a no-nonsense economic nationalist and a dealmaker who’s willing to backpedal when markets flinch.
Trump has been railing against “unfair” trade deals since the 1980s, claiming the U.S. was bleeding trillions. But it’s only now, in his second term, that those grievances have crystallized into a full-blown policy doctrine. In April 2025, he slapped tariffs on imports from 180 countries — covering nearly the entire global economy, from the European Union to Latin America and Southeast Asia.
The fallout was swift. The S&P 500 tumbled 4.3% in a single day, yields on 10-year U.S. Treasurys plunged, and gold soared to $2,460 an ounce — its highest point since 2023. But just days later, the White House hit pause, delaying most of the tariffs by three months.
Wall Street smelled blood in the water.
Enter the TACO theory — short for “Trump Always Chickens Out.” The idea, floated by traders and analysts, is that Trump uses tariffs as leverage but folds at the first sign of market panic. It's trade policy by brinkmanship, critics say — heavy on bluster, light on follow-through.
Trump, unsurprisingly, isn’t having it. “This isn’t backing down. This is strategy,” he shot back on Fox Business. “This is how you negotiate.” But the data paints a different picture — not of retreat, but of transformation.
By June 2025, according to Yale’s Budget Lab, the average U.S. tariff rate had climbed to 15.8% — the highest since the Smoot-Hawley era of the 1930s. If the next wave of duties kicks in on August 1, that figure will spike to 20.6%, a level unseen in over a century. For context, during the peak of the U.S.-China trade war (2018–2020), average tariffs hovered just above 2.5%.
China has borne the brunt. By July, the total U.S. tariff load on Chinese goods had surged to 145%, including a punishing 100% on electronics, solar panels, batteries, and steel. Chinese exports to the U.S. plummeted 31% year-over-year in May. Beijing responded with counter-tariffs of up to 120% on American soy and semiconductors — but on a far smaller scale, underscoring China’s dependency on the U.S. market.
Back home, the tariff windfall is reshaping the federal ledger. In Q2 2025, customs duties poured $64 billion into the Treasury — a 276% increase over the same period in 2024. Brookings projects that annual tariff revenue could top $240 billion. As Wall Street Journal’s Greg Ip put it, “That’s not enough to cover the promised middle-class income tax repeal, but it builds a massive war chest for infrastructure, defense, and farm bailouts.”
The global reaction? Muted — and strategic. Countries hit with tariffs are scrambling for carveouts rather than retaliation. Germany, Japan, South Korea, and Canada have already dispatched envoys to Washington. According to Politico, more than 70 governments received confidential memos detailing specific tariffs and warning that any retaliatory measures would be mirrored within 72 hours.
And then there’s the whiplash diplomacy. In January, Trump slapped tariffs on Colombia for refusing to accept deported migrants — only to rescind them hours later after a call with President Gustavo Petro. That episode triggered a fresh wave of criticism, even from within the GOP. “If tariffs become a tool of immigration policy,” warned Texas Senator Ted Cruz, “they lose their economic rationale.”
Still, the TACO theory has taken on a life of its own — a sort of cult meme in financial circles from Manhattan to the Magnificent Mile. But if you strip away the snark, the numbers tell a story of seismic change. Trump hasn’t just revived the trade-war playbook — he’s rewritten it.
As Ernie Tedeschi, head of Yale’s Budget Lab, puts it: “This isn’t the soft-touch tariff theater of Trump’s first term. This is a full-on economic revolution.”
Trump’s Tariff Blitz Isn’t a Bluff — It’s a Full-On Economic Reset
One thing is clear: Donald Trump isn’t playing for quick wins. He’s betting big on transformational pressure — a strategy aimed not at concessions around the edges, but at a fundamental realignment of the global trade system to America’s advantage. Whether that bet pays off will depend on how long global markets can stomach a new reality: a world where the planet’s top trading partner has morphed into its most aggressive tariff enforcer.
Trump’s second term is fast becoming a high-stakes economic experiment. The U.S. has unleashed a tidal wave of protectionist policies on the global marketplace — but it’s doing so largely alone. Despite the White House’s pledge to strike “90 deals in 90 days,” the results so far have been underwhelming. Just a handful of agreements have been signed, none of them structurally significant.
As the Financial Times points out, the global response to Trump’s tariff barrage has been “timid,” bordering on toothless. Only two nations — Canada and China — have taken concrete retaliatory steps. Beijing, despite its fierce rhetoric, agreed to a partial trade deal with Washington in May, acknowledging its dependence on U.S. consumer demand. Canada responded with duties on aluminum, lumber, and autos — but has kept the door open for dialogue with Trump’s team.
Leading American economists see this restraint not as weakness, but as strategic realism. “Modern global trade works like a wheel,” says Martha Bengoa, a professor of international economics in New York, speaking to the Financial Times. “The U.S. is the hub, and other nations are the spokes. If you damage the hub, the wheel falls apart.” That, she argues, is the core paradox of Trump’s trade war: even politically motivated retaliation could end up hurting the very countries dishing it out.
Still, the White House insists everything is going according to plan. While fewer than five of the promised “90 deals” have materialized, officials portray the lack of progress as a feature, not a bug. “He’s not chasing deals — the tariffs are the leverage,” writes Wall Street Journal columnist Greg Ip. “Trump believes the rest of the world needs America more than America needs them. So why offer anything in return?”
Meanwhile, the blowback from Trump’s tariff agenda is beginning to ripple through the U.S. economy. According to the Bureau of Economic Analysis, inflation in June 2025 rose 0.3% month-over-month, translating to a 2.7% annual rate — slightly above the Fed’s comfort zone. The White House, however, is claiming victory: “Once again, the doomsayers were wrong. Prices aren’t spiraling,” declared press secretary Karoline Leavitt.
But a closer look suggests a more complicated picture. While headline inflation remains stable, price spikes are already showing up in import-heavy categories. According to the Bureau of Labor Statistics, June saw a 1.4% jump in toy prices, 1.4% for computers, 1.9% for home appliances, 2.2% for coffee, and a sharp 5.5% spike for bedding. The standout? Consumer electronics, up 4.5% in just one month.
And experts warn this is just the beginning. “We’re only seeing the effects of a fraction of the tariffs,” cautions Heather Long, chief economist at the Navy Federal Credit Union, speaking to CNN. “Once the full slate kicks in on August 1, price pressures will accelerate. This is inning one — the game’s just getting started.”
So far, several factors have cushioned the blow. Importers stockpiled goods in advance. Some companies are eating the costs to maintain market share. And, of course, economic data lags. But these buffers are temporary — and the real squeeze is coming.
By year’s end, Yale’s Budget Lab projects that Trump’s announced tariffs will add 2.1% to consumer prices, slicing roughly $2,800 from the average household’s purchasing power. The pain won’t be evenly distributed: lower-income families, who spend more on imported goods, will bear the brunt.
Still, Trump’s support remains rock-solid in Middle America. His protectionist crusade resonates deeply in the country’s heartland — where voters are fed up with globalism and hungry for strongman economics. “Trump might win his trade war,” Greg Ip concludes. “The question is, will America?”
At this point, there’s no mistaking what’s underway. This isn’t theater, and it’s not a bluff. It’s a costly, calculated, and politically combustible shift from globalization to economic nationalism. Where tariffs were once a bargaining chip, they’ve now become a primary instrument of geopolitical engineering — and everyone, friend and foe alike, is being handed the bill.