Trump's Tariff Strategy: A Tactical Approach to Trade Negotiations

Qinbafrank posted on X. U.S. President Donald Trump has developed a strategic approach to handling tariff negotiations, which involves a series of calculated steps aimed at maximizing psychological impact and market reactions. The process typically begins on a Friday when President Trump releases a vague statement suggesting potential tariff increases on specific countries or industries. This initial uncertainty often leads to a market downturn, as seen when Trump threatened tariffs on Denmark. Later, either on the same day or shortly after, Trump announces a significant tariff increase, usually exceeding 25%. Over the weekend, while markets are closed, he intensifies his tariff threats to maximize their psychological impact. During this time, the targeted countries often respond publicly or express willingness to negotiate. By Sunday evening at 6 p.m. Eastern Time, when the futures market reopens, there is often a volatile reaction to the tariff news, with stock index futures typically declining. On Monday and Tuesday, Trump continues to apply public pressure, but investors begin to realize that the tariffs are not yet in effect and are scheduled for implementation weeks later. By Wednesday of the same week, bargain hunters trigger a technical rebound, although this rally is usually short-lived, leading to another market dip. This period is often when savvy investors start positioning themselves strategically. Approximately a week later, during the following weekend, Trump announces that discussions are underway with the leaders of the tariff-targeted countries to find a resolution. By Sunday evening at 6 p.m. Eastern Time, the futures market opens with a significant rise, fueled by renewed optimism, although gains tend to diminish by the time the spot market opens on Monday. Following the market opening, senior government officials, including Treasury Secretary Besent, appear on live television to reassure investors and emphasize progress in reaching an agreement. Over the next two to four weeks, various members of the Trump administration continue to hint at advancements in trade negotiations. Eventually, a trade agreement is reached, leading to new market highs. The cycle then repeats from step one. Timing is crucial in Trump's negotiation strategy, which revolves around pressure and strategic delays before tariffs take effect, allowing time for agreements to be reached. Trump's ultimate goal is to avoid actual tariff implementation, aiming instead for successful agreements. This explains the frequent weekend announcements, made when markets are closed, to push threats to their limits and achieve significant market and geopolitical impacts. The question remains whether this approach will continue to be effective.