Understanding Trump's tariff reversals

President Donald Trump has pitched tariffs to address varied US economic and national security concerns, while also generating revenues. And shortly after taking office in early 2025, he ordered a flurry of new tariffs on nearly all countries. But he also quickly eased or abandoned many of them. This process of imposing and reversing tariffs produced four major types of results, in rough chronological order: stabilization of financial markets, concessions from foreign governments, corporate investment pledges, and lower US consumer prices on some items.

The combined economic effects of reversals are unclear at this point, but to get a rough sense of their relative potential importance, we estimated the hypothetical annual tariff revenues the United States would have collected if each initial tariff threat had been implemented for a year. This measure provides a common basis for comparing the scale of tariff threats and the concessions or reversals that followed. By that measure, the biggest tariff threats served as negotiating leverage for foreign economic concessions, as seen in table 1 below.

Financial turmoil

Soon after Trump announced new tariffs on April 2, 2025—which he dubbed "Liberation Day"—he backtracked on some, with the effect of arresting a stock market rout. On April 2, he had ordered a universal baseline 10 percent tariff on nearly all imports to take effect immediately, and he threatened additional "reciprocal" tariffs on individual trading partners to reflect their bilateral merchandise trade surpluses with the United States, to take effect April 9. During the week following that announcement, the S&P 500 plunged more than 12 percent while yields on 10-year Treasury notes spiked about half of 1 percentage point.

On April 9, Trump paused the "reciprocal" tariffs for 90 days (a period that was later extended) but kept the baseline 10 percent tariff. Stock and bond markets rallied. If all the threatened "reciprocal" tariffs had taken full effect, they would have generated annual US tariff revenue of $262.7 billion, assuming US import volumes and prices did not change in response (the same assumption applies to the subsequent calculations below).

Negotiating leverage

Tariffs are often withdrawn or lowered to press for concessions by a trading partner. Threatened tariffs on imports from China are exhibit A in the use of negotiating leverage. On April 9, 2025, after pausing the "reciprocal" tariffs announced on Liberation Day, Trump threatened an additional tariff of 125 percent on imports from China, worth an annualized $495.7 billion. Beijing quickly retaliated. The massive threatened tariffs jeopardized the global economy. Thus, on May 12, 2025, the United States and China agreed to reduce these tariffs for 90 days to 10 percent on the United States and to 30 percent on China but left in place other US tariffs on China.

On Liberation Day, Trump threatened a 27.5 percent "reciprocal" tariff on the United Kingdom. In June 2025, the United States agreed to reduce this tariff to 10 percent on 100,000 auto imports annually. It also agreed to eliminate the baseline 10 percent tariff on civil aircraft and set a future most-favored-nation quota on steel and aluminum components. In turn, the United Kingdom enlarged market access for US meat and ethanol exports. Before they were withdrawn, the threatened US Liberation Day tariffs on UK autos and aircraft amounted to $1.7 billion.[1]

The United States threatened to impose a 20 percent "reciprocal tariff" on the European Union. On July 27, 2025, Trump met European Commission president Ursula von der Leyen at his golf course in Turnberry, Scotland, and agreed on a framework for US-EU trade and investment. He implemented the framework for the United States with a September 2025 executive order. EU implementation is working its way through the EU Parliament. Combined US tariffs on the European Union were capped at 15 percent. In turn, the European Union agreed to eliminate tariffs on US industrial exports; give US seafood and agricultural exports preferential access; procure US energy, artificial intelligence (AI), and semiconductor exports; and invest $600 billion in US projects over three years. Threatened US tariffs on autos before the Turnberry deal amounted to $6.3 billion annualized.

Late in July 2025, the United States and Japan reached a framework agreement, recorded in a September 2025 memorandum of understanding. The 24 percent US Liberation Day tariffs on Japan were generally capped at 15 percent, but separate tariffs of 50 percent on steel, aluminum, and copper remained in place. In turn, Japan agreed to invest $550 billion in US projects, buy 100 Boeing aircraft, increase its rice imports by 75 percent, and buy $8 billion of other US agricultural products. Before the July 2025 deal, threatened tariffs on auto imports from Japan amounted to $5.2 billion annualized.

Also late in July 2025, the United States and South Korea reached a framework agreement, finalized in October 2025. The threatened 25 percent US Liberation Day tariffs on Korea were capped at 15 percent, but other tariffs remained in place. Korea agreed to invest $350 billion in approved US projects. Threatened tariffs on imports from Korea amounted to $20.3 billion annualized.

Negotiating leverage with Canada remains a continuing saga. On an annualized basis, threatened US tariffs amount to $1.3 billion.

Industrial subsidies

The Global Trade Alert recently uncovered a fresh avenue for tariff reversals: reduce or eliminate tariffs on imports by US firms that make approved commitments to invest in US plants. Between April and August 2026, executive orders authorized the secretary of commerce to negotiate company-specific tariffs to address what the Trump administration identified as national security threats under Section 232 of the Trade Expansion Act of 1962. The administration imposed or threatened new duties on pharmaceuticals, aluminum, polysilicon derivatives, and drones. The government struck agreements with several companies under this authority but has not disclosed the terms. US imports of the specified items amounted to $264 billion in 2025. Threatened tariffs on aluminum, before the reversals, amounted to roughly $5.8 billion annualized.

Consumer prices

After more than five years of high inflation, Americans are sensitive to any policy that stretches household budgets. Serious research shows that tariffs are almost entirely paid by US households and business firms, not by foreign exporters.

Trump's executive order issued November 14, 2025, exempted from all Liberation Day tariffs a range of tropical products plus beef, oranges, and tomatoes. The order did not mention consumer prices, but the accompanying White House fact sheet did. On an annualized basis, the threatened tariffs amounted to $2.9 billion before they were reversed.

In August 2026, Trump announced that, for the next three months, up to 100,000 tons per month of ground beef could enter the US tariff-free, a measure clearly intended to provide relief from high prices at the meat counter. Threatened beef tariffs amounted to $2.1 billion annualized.

Summing up

According to these estimates, by far the biggest effect of these tariff threats and reversals was to deliver negotiating coin for concessions by foreign partners. Trump's biggest threatened tariff was on Chinese imports, worth some $496 billion on an annualized basis. Other reversals, with respect to the United Kingdom, European Union, and Japan, brought the total threats under this heading to $509 billion. Collectively, reversals with principal effects other than negotiating leverage addressed threats totaling just $274 billion annualized.

Note

1. Steel and aluminum tariffs are excluded from the estimate of the annualized threatened tariff amount because the US-UK Economic Prosperity Deal did not eliminate or reduce these duties. Rather, the agreement prevented an increase in these tariffs. These duties, therefore, are not counted as an additional tariff burden attributable to the agreement.