Trump’s Walk-Back: A Cautious Retreat from Tariff-Driven Turbulence
After weeks of market unease and escalating fears, President Donald Trump appears to be softening elements of his economic strategy — particularly on tariffs and the independence of the Federal Reserve. The move follows mounting concern that his proposed 145% tariff on a major U.S. trading partner, along with discussions of removing Fed Chair Jerome Powell, would rattle both global markets and investor confidence.
Yet the damage may already be done.
“More damaging than the tariffs themselves is the uncertainty the White House has created,” said Wendy Edelberg, senior fellow in Economic Studies at the Brookings Institution. “And the lurching hasn’t ended. In fact, this is simply another lurch.”
Despite a strong midweek rebound for U.S. equities, the SPX 500 remains down 11% from its January levels — reflecting investor concern over what many view as erratic and destabilizing policy shifts.
According to FactSet, over $7 trillion in market value has been erased since record highs were hit just two months ago. For now, even a temporary pause on aggressive tariff expansion or direct Fed interference is being interpreted as a win by the markets.
“Markets are terrified about the dumb things he’s going to do, and when he doesn’t do them, they’re thrilled,” said Justin Wolfers, economics professor at the University of Michigan. “It’s clear the economy will slow — the question is how much.”
Economists currently place the risk of a U.S. recession in 2025 at anywhere from 50% to 70%, with that forecast fluctuating based on the trajectory of the Trump-aligned trade agenda.
Even if the new tariffs were rolled back today, the economic cost of uncertainty alone could subtract 1% from GDP, according to Wharton professor Kent Smetters.
It’s worth noting that no broader rollback of tariffs has been formally discussed. Tariffs on Chinese imports may ease, but a suite of 10% to 25% tariffs remains in place — affecting everything from autos to aluminum and certain North American goods.
Tesla's Image Problem: Musk Tries to Rebuild Trust
Meanwhile, Elon Musk is facing a reputational crisis of his own — and investors are watching closely.
On Tesla’s latest earnings call, Musk announced he would scale back his political ventures and focus more intently on Tesla’s core business. The move followed a 71% drop in quarterly net income and comes as the company navigates growing concerns about demand, competition, and brand erosion.
Shares rose 5% on the news, despite the disappointing financial report.
“Sales demand will be down 10% permanently because of Musk’s recent behavior,” said Dan Ives, Managing Director at Wedbush Securities. “The brand damage won’t go away with just this one move.”
Others were more critical.
“The idea that Musk simply focusing on Tesla will fix everything is complete garbage,” said Gordon Johnson of GLJ Research.
Tesla has also been losing ground to faster-moving and lower-cost Chinese EV manufacturers. With an aging product lineup and the polarizing Cybertruck still struggling to gain mainstream traction, the road ahead is uncertain — even with Musk’s renewed attention.
Bottom Line
Both Trump and Musk are signaling course corrections — but markets and consumers are still reeling from the effects of prolonged volatility and public unpredictability. Whether these U-turns are enough to restore confidence remains to be seen.
In both cases, trust — once eroded — is proving far harder to rebuild than it was to break.
