Why Trump Blinked
Author: Greg Valliere
February 4, 2025
WE THOUGHT YESTERDAY that Donald Trump would reverse course and blink on trade — but not this soon. Our sources report that the dam burst quickly, starting early yesterday morning and culminating with a face-saving — and temporary — deal by late afternoon.
THERE WERE PLENTY OF LESSONS ON HOW TRUMP WILL GOVERN — HERE ARE FIVE TAKS-AWAYS:
1. Trump knows his political hold on the House is tentative. He only has a couple of votes to spare, and it was clear yesterday that Republican support for a Canadian trade war is lukewarm — especially in U.S. red districts and in the farmland.
2. Trump devours the newspapers, and the avalanche of criticism — especially from the Wall Street Journal — made a difference. So Rupert Murdoch and his free trade family will have a seat at the table. Their morning editorials are must-reads.
3. More to come — while trade negotiations drag on, Trump will focus on other issues. Republicans are hopelessly behind in efforts to produce a budget before a March 14 deadline to avoid a government shutdown. Trump could cave on this also; he knows that higher food prices and a softening economy are still likely — with his trade policies getting some of the blame.
4. Predict at your own peril. On several issues — deep spending cuts, the Canada-Mexico trade deal, funding for USAid, his risky reliance on Elon Musk, etc. — Trump will shift quickly if the polls turn against him.
5. The damage has been done with Canada, where Trump will never again be liked or trusted, especially since Trump continued yesterday to voice his ridiculous demand to make Canada the 51st state,
WHAT’S THE NEXT TARGET? The European Union and China face a nasty trade war with the U.S. by spring, when the big domestic story will be tax cuts, which face a very long slog in the fractious Congress.
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