Voters are the only ones who could stop Trump’s tariff game

Jamie Dettmer is opinion editor at POLITICO Europe.

WASHINGTON — So, it turns out U.S. President Donald Trump isn’t a master of the universe after all.

And as the real masters — the bond vigilantes, hedge and pension fund bosses and high financiers — made clear they had had enough last week, it forced Trump to pause his signature policy and effect a climbdown from the giddy heights of “reciprocal tariffs.” Although, he did leave in place his across-the-board 10 percent global tariff on all imports to the U.S.

Whether this tariff pause for all but China will extend beyond the initial 90 days Trump earmarked remains to be seen though — likely he doesn’t know himself yet. As his former National Security Adviser John Bolton warned recently, Trump’s dealings are “transactional, ad hoc, episodic.”

However, there’s little doubt it was investors offloading U.S. debt and demanding a high premium for buying U.S. Treasuries that compelled Trump to see some sense. The plunging stock market, meanwhile, didn’t seem to have any effect on him, with his senior trade adviser Kevin Hassett simply shrugging his shoulders, saying it was “no big deal.”

But spiking borrowing costs compelled a heavily indebted U.S. government to change its mind. Question is, will it be enough to possibly keep this from happening again?

The market mayhem sparked by Trump’s “Liberation Day” tariffs was a déjà vu moment for Britain’s former Chancellor of the Exchequer Kwasi Kwarteng, who infamously tanked the U.K. economy with a radical, unfunded tax-cutting mini-budget in 2022. And much like he and his boss, then-Prime Minister Liz Truss, were judged by bond vigilantes, so too was Trump, Kwarteng said in a television interview.

“The bond market, as was the case in my and Liz Truss’s experience, that was the key … I think that was critical because I don’t think [Trump] really minds about the stock markets in the way that he would about the bond market, because that directly affects the government’s ability to borrow, the federal government, and also mortgage rates in the U.S., because that’s going to be pushing up mortgage rates for his base,” he added.

In the U.K., the thumbs-down from the masters of the universe meant Truss had to quit after being prime minister for just 44 days. Trump is president for the next four years — that is, unless a thrice-shy Congress impeaches him yet again and that’s not going to happen, at least not this side of the midterms. (Parliamentary systems do, indeed, have some advantages!)

So, could the bond vigilantes deter the U.S. president from repeating this exercise? That just isn’t clear.

Whether this tariff pause for all but China will extend beyond the initial 90 days Trump earmarked remains to be seen. | Chip Somodevilla/Getty Images

Trump is a lawless president with an ingrained sense of impunity, who has spent his life defying norms and shunning rules. Like the villainous mobster Oz says in the television series “The Penguin”: “How’s anyone supposed to know your worth unless you tell ’em, huh?” And while the bond vigilantes may have disagreed with Trump’s valuation, that doesn’t mean the president — much like Oz — won’t come back to try and get his way.

Just consider his extraordinary remarks before a congressional Republican audience the other day: “These countries are calling us up, kissing my ass. They are. They are dying to make a deal. ‘Please, please, sir, make a deal. I’ll do anything. I’ll do anything, sir.’” Just replace the word “countries,” and the line wouldn’t be out of place in an episode of “The Penguin.”

Certainly, the bond markets still don’t trust Trump after his climbdown. All they see is chaos and incoherence and policy changing on a whim. They see an economic team at odds with itself, unable to agree on whether tariffs are meant to reduce deficits, replace income taxes or be a negotiating ploy for trade concessions — a team that is often undercut by the president himself in real time, contradicting himself with abandon and seemingly unable to appreciate that re-shoring, for example, will take years.

The bond markets see reversals, U-turns and — more to its benefit than not — a rules-based order that’s shaped and underwritten by America being upended. They also see no end in sight for a trade war between the U.S. and China, with the latter better positioned to weather a standoff. So, even after the climbdown, they’re still demanding a higher premium to buy Treasuries, and money managers are advising clients to invest in Europe or Asia instead.

Apart from the bond vigilantes, then, the only force that might be able deter Trump from picking up where he left off are voters. Even a supine Congress, with indolent Republican majorities that have largely bought into Trump’s Oz-like cult of personality, might be moved to do something and check him, fearing they could face catastrophe in the midterm elections.

And if the voters decide they’ve had enough of the economic mayhem, they might eventually get through to Trump himself, as the president has already stated his ambitions to possibly defy the 22nd amendment and stand for a third term. Last month, he told NBC News there are “methods” that would allow him to do so, adding that he wasn’t joking. He also declined to confirm he would vacate the White House when his second term ends in 2029.

So, how do voters view Trump now?

His popularity has, it seems, declined. According to a YouGov poll conducted last week, 51 percent of Americans disapprove of his job performance while 43 percent approve — that’s a net approval of –8. Discontent is also rising with how he’s handling the economy, with a net approval of –10; and when it comes inflation and prices, he’s at a net approval of –19, down from –8.

But if you’re hoping for a voter-compelled change of heart anytime soon, be aware that Trump’s base is still sticking with him, with 66 percent of his 2024 voters approving of how he’s handling the economy. And despite the market upheavals, 57 percent of Republican voters approve of his tariff policy — the rate dramatically jumps to 74 percent for self-identified MAGA Republicans.

However, with the 10 percent across-the-board tariff still in place and a sinking dollar that’s lost 10 percent in value measured against a basket of global currencies since Trump’s inauguration, consumer prices will inevitably rise and the president’s tax-cut proposals won’t offset them — which explains why he exempted smartphones, computers and some other electronics from the reciprocal tariffs over the weekend.

And when overall prices and mortgage rates rise as a consequence of his tariff imposition, maybe then Trump’s MAGA base will start eroding.