What is the Endgame of Trump’s Tariffs?

It’s an occupational hazard of a trade economist, perhaps, that you will get your holiday disrupted by Trump’s trade tirades. At any rate, this is what happened to me as I went for an Easter break on the eve of Trump’s “Liberation Day”. During a week in Berlin, I ended up talking about Trump – and what surprised is that many policymakers I interacted with seemed to “understand” Trump’s move. I thought the tariff package to be deeply ill-informed but the response was quite often along the lines of “Donald Trump has a clear strategy on trade – and he has an end goal that he wants to hit with his tariff escalation.“ I had to ask myself: what have I missed?

Well, perhaps nothing, but there is an argument that trade liberals like myself need better responses to. What intelligent Trump supporters will tell you is that the entire US tariffs have, as an endgame, one simple and clear goal: to renegotiate the fundamental rules of the global trading system, which are seen as broken as far as they apply on US-China trade. One of the arguments put forward by those who support Trump’s tariffs is that, in fact, they are based on a clear strategy following a multi-step playbook.

A first step is to “get everyone’s attention“ and, in strategic negotiation’s terms, set the anchor of the negotiations. This follows a general approach that President Trump is also using in other negotiation areas (beyond trade), which is to set extreme goals from the start with the aim to then legitimise less extreme negotiation outcomes. In trade terms, this means to set very high tariffs against a multitude of countries at the very start only to then deliberately reduce them again to a level of a minimum of 10% (or higher). This tactic, supposedly, makes the 10% tariff increase compared to before more acceptable for other countries.

And this is where liberals and Trump supporters start to part ways in their understanding. Liberals celebrate that Donald Trump has “folded“ and given in, realising that his initial actions were doomed to fail. Meanwhile, Trump supporters will tell you it is simply a part of the grand strategy of setting the anchor for the following negotiations. After the first act of raising tariffs for everyone, the second act of Trump’s playbook, according to Trump supporters, was to deliberately reduce the tariffs, except for China.

The third act, in which we find ourselves now, is the start of the actual negotiation phase. But these negotiations, set for approximately three months, are not primarily aimed at making deals with other countries (which can be done as a side effect). They are rather about using pressure to gather support of other countries, for example by making deals with them, to build up pressure solely against China. The final act of the playbook is then a serious and direct negotiation with China, culminating in a substantial deal. The fact that this may be more realistic than you think is illustrated by China already warning other countries to not team up with the US – or else.

Why China? China can certainly be considered the main competitor in economic and trade terms for the US now and in the foreseeable future. But more importantly, according to Trump supporters, the global trading system is broken because China is refusing to play fair. The reasons for this view, however, lie deeper in the past and have to do with basic understandings on the ground rules of global trade between the developed Western world on one side and China on the other which have gone wrong.

It is not a wild proposition. Take for example the accession of China to the WTO. China joined the WTO in 2001 after a lengthy process of negotiations. The results of these negotiations were summed up in an accession protocol essentially stating that China would be granted market economy status 15 years after it joined the WTO. The understanding of Chinese negotiators was that this transition to market economy status was automatic, while Western counterparts expected China to first implement a series of domestic and structural reforms. In 2016, it became apparent that many Western trading partners insisted on further criteria that China should meet before being granted market economy status. Note that being treated as non-market economy has serious repercussions in anti-dumping investigations, as it allows trading partners to use alternative methods for calculating dumping margins.

Another example is the classification of China as a developing country in the WTO. The Doha round failed in part as some developing countries such as China evolved economically during the early years of the round until they were no longer seen by the West as developing countries. However, countries like China insisted that they should still be treated as such and enjoy certain rights that come with this status.

Such examples ultimately deepened resolve on both sides and prompted the feeling that the other side was trying to profit from the system in an unintended way, and is no longer “following the rules“. If we fast forward more than two decades since its accession to the WTO, we see a track record of China still not fully implementing reforms that for example the EU keeps asking for, but at the same time clearly developing beyond the status of a developing country. It means the common ground that the last multilateral trading round at the WTO was built on broke apart in a world that changed around it, and has since not been addressed. This is what Mr. Trump supposedly is trying to renegotiate through his tariff war. Those that support Trump’s tariffs will tell you that he is seeking a new “Plaza Accord“ type of agreement to renegotiate the basic understandings and ground rules of global trade, but this time involving China.

Perhaps this is where they will go. The official negotiation phase between the US and China has only just started. On 12 May 2025, China and the United States released a joint statement temporarily ending the recent escalation in tariffs: each agreed to lower their tariffs by 115% for 90 days, which only applies to import taxes imposed since 2 April 2025. This lowering comes much later compared to the lowering of tariffs granted to other trading partners such as the EU. Note also that Mr. Trump himself openly proclaimed the negotiations with China should lead to a “total reset” of US-China trade relations. The initial lowering of tariffs can certainly be considered as a good sign. But renegotiating the way in which China engages in trade relations with the US (and by extension with other countries too) is likely to take some time.

Continuing our thought experiment of assuming Trump is following such a strategy inevitably brings us to facing the uncomfortable question of whether there could be merit in it. It may be the case that President Trump has diagnosed a crucial problem which has already led to significant decoupling between China and the US, the two largest economies in the world. An ability to identify key problems may even be one of the strengths of Trump. But the approach he has chosen to address this issue would have several serious problems.

Firstly, the cost-benefit ratio is way off. And this does not refer to the fluctuating stock markets globally (Trump supporters will tell you that this is “priced in“ and will quickly go back to normal). It is rather that Trump seriously ignores just how detrimental uncertainty and lack of trust is for business. And his strategy, if we follow the arguments put forward above, is in fact using uncertainty and shock as negotiation tactics. However, a period of uncertainty through unforeseeable back-and-forth tariff escalation for global business, of several months if not longer, will have a significant cost. Investments are delayed, market’s downgraded, stock capital permanently displaced, and most importantly – trust permanently broken. Take the relationship between Canada and the US as an example. It is difficult to imagine that even the best deal with China to agree on a new set of rules for global trade would offset costs globally.

Secondly, President Trump is, according to this argumentation, counting on China to give in sooner rather than later. And here lay a couple of severe misconceptions too. Chinese leadership is already now on a rapid path to diversify and renegotiate terms with close partners and neighbours (e.g. Vietnam). Another key point is that Mr. Trump’s negotiation tactic is not exactly perfect either. While he may be able to set an anchor, negotiation theory suggests that following accepted standards and rules is a powerful way to do well in negotiations too. And this is what China is now able to do. Trump allowed China to suddenly be on the right side of global trade rules and portray itself as the calm entity at the table. After all, EU representatives have already called Trump’s tariffs as “unjustified, illegal and disproportionate”, which also legitimises the responses of other countries to them.

Thirdly, Mr. Trump is likely to meet increasing domestic resistance including from business, Republicans but also entire states within the US. Time plays against his radical approach and other negotiating entities are aware of this. It is one of the basic strategies of Chinese leadership to play for time and simply wait out how problems develop. It may well be the case that, for China, the problem will simply “go away” as Trump is less and less able to insist on his maximum demands.

What Does This Mean for the EU?

Two takeaways would appear from this thought experiment for EU policymakers and trade policy analysts. The main takeaway would be that there is some merit in spending time to “listen to the other side“, however much of a waste of time it seems to be. As an analyst or policymaker, it is not enough to dismiss the US President and his actions as “crazy” and “chaotic” as it makes it more difficult to engage with his policy. We need to take Trump seriously to assess an outlook, rather than reacting to his recent moves only.

The second main takeaway for the EU is that it is not the main target of Trump’s tariffs. A deal with the US administration is possible for the EU – and Trump himself has said he believes that there will be a deal with the EU “100%“. Above all, therefore, EU policymakers should continue to remain calm and not get dragged into a reciprocal escalation of tariffs. Most likely, the EU is not the main target – and should therefore refuse to panic.