The Trump Tariff Shock: Corporate America’s Wake-Up Call
The line fell silent. In an unexpected phone call from the Oval Office, President Trump delivered unwelcome news to three of America’s most influential auto executives: Mary Barra of General Motors, John Elkann of Stellantis, and Jim Farley of Ford. The call took place in early March, and the message was clear: tariffs on cars imported from Canada and Mexico were set to take effect on April 2. “Everyone needs to buckle up,” Trump said. The Big Three automakers, like many other industry leaders, had been arguing that these tariffs would disrupt supply chains and inflict significant damage on their sector. Earlier, they had managed to secure a one-month reprieve, pushing the effective date to April 2. But now, they seemed to realize that further resistance was futile. They had gotten all they were going to get.
For corporate America, the shock of Trump’s second term lies in the stark realization that he truly believes what he’s been saying publicly for decades: foreign countries are taking advantage of the United States, and tariffs are the solution. Trump doesn’t just view tariffs as a negotiating tool; he sees them as a silver bullet for America’s economic challenges. To him, tariffs are a unilateral power he can wield at will, creating a dynamic where even the most powerful people—like the auto executives on that call—must come to him to beg for relief. This account is based on interviews with over a dozen Trump administration officials and others familiar with the White House’s internal dynamics on tariffs. Many of these individuals requested anonymity to discuss private conversations and deliberations.
The Misread: Corporate America’s Underestimation of Trump’s Tariff Zeal
For years, corporate America clung to the belief that Trump saw tariffs primarily as a bargaining chip, not as an end goal. The thinking was that Trump loved the leverage tariffs provided, not the tariffs themselves. This view was reinforced by the idea that Trump was guided by the stock market, which many assumed would act as a check on his tariff policies. During his first term, Trump had applied tariffs on over $300 billion worth of goods, but the program was narrower, and he seemed to have a weaker stomach for the economic pain it caused. Now, less than two months into his second term, he has slapped tariffs on approximately $1 trillion worth of goods—a far more aggressive approach.
The corporate world, which spends millions on consultants to decode Trump’s behavior, is now scrambling to reassess its assumptions. In the lead-up to the 2024 election, Trump’s economic advisers sent reassuring signals to Wall Street, suggesting that his second-term trade policy would resemble his first. Howard Lutnick, now commerce secretary, described tariffs as a “bargaining chip” that would lead to freer markets. Scott Bessent, treasury secretary, wrote to his clients that while the “tariff gun will always be loaded and on the table,” it would “rarely be discharged.” These assurances led many to believe that Trump’s tariff rhetoric was more bark than bite. But as the new tariffs took effect, it became clear that this was a misread. “I think he was clear,” said Bill Reinsch, a senior adviser at the Center for Strategic and International Studies. “I don’t think people paid much attention.”
A Changed Trump: Confidence and Conviction in His Second Term
One of the most striking differences between Trump’s first and second terms is his newfound confidence in his instincts. During his first term, Trump faced fierce internal opposition to his tariff policies from advisers like Steven Mnuchin and Gary Cohn, who warned that tariffs would raise costs for consumers and slow the economy. His administration was divided between “globalists” who favored free trade and hard-liners like Peter Navarro, who championed protectionism. The debates were often intense, with Navarro and Cohn engaging in Oval Office shouting matches.
In his second term, however, Trump has surrounded himself with advisers who echo his views. Navarro, now back in the White House, no longer faces the same level of pushback. The new team includes figures like Lutnick and Bessent, who have publicly embraced tariffs. While they may privately harbor doubts, no one in the administration is strenuously challenging Trump’s economic ideas. Republican lawmakers, too, have largely fallen in line, either embracing protectionism or staying silent. The Wall Street Journal editorial board is one of the few right-leaning institutions still criticizing Trump’s approach to trade.
The Ripple Effects: A Divided Corporate America
As Trump doubles down on tariffs, the corporate community is navigating a complex landscape. Some executives have tried to push back privately, but few have spoken out publicly, fearing repercussions. Those who have criticized Trump’s policies have faced his ire. Privately, many executives acknowledge that Trump has a point about unfair trade practices by China and Europe. They also note that his aggressive approach has yielded some results, such as Mexico’s efforts to stem the flow of undocumented migrants and fentanyl into the United States.
Still, the broader impact of the tariffs is causing concern. The Dow Jones industrial average has fallen by more than 600 points since the new tariffs took effect, and the S&P 500 has slid into a correction, dropping over 10% from its peak. While some polls show growing disapproval of Trump’s handling of the economy, his advisers argue that this is more about lingering high prices than the tariffs themselves. They also point to the stock market’s performance during the Biden presidency as evidence that it is not a reliable indicator of economic health or voter sentiment.
Limited Mercy: Trump’s Hard Line on Exemptions
While Trump has granted some exemptions to his tariffs, he has been far less willing to do so in his second term than in his first. Agriculture Secretary Brooke Rollins, for example, heard from farmers seeking an exemption for potash, a key ingredient for fertilizer. Trump ultimately agreed to a reduced 10% tariff on potash, but Rollins described him as “unhappy about the reprieve.” In other cases, Trump has shown little willingness to offer significant industry exemptions. Companies that have pushed back during discussions with the White House have generally done so privately, sandwiching any criticism of Trump between lavish praise.
The limited exemptions and lack of public dissent reflect the broader dynamic: corporate America is walking a tightrope, balancing criticism of the tariffs with praise for Trump’s other policies, such as tax cuts and deregulation. Many companies are holding their breath, hoping that the tariffs will be temporary or that exemptions will be granted. But for now, the message from the White House is clear: Trump’s tariffs are here to stay, and everyone needs to get on board.
The Broader Implications: A New Economic Era
As Trump continues to escalate his tariff policies, the world is watching. Foreign leaders are assessing whether he will follow through on his threats, searching for signs of weakness. Trump’s advisers say he believes that backing down would damage his image as a strongman. While he has occasionally granted exemptions—such as for products from Canada and Mexico that comply with his North American trade deal—he has repeatedly signaled that more and bigger tariffs are on the way.
For corporate America, the challenge is to adapt to a new economic reality. The days of assuming that Trump’s tariff rhetoric was mostly bluff are over. Bill Reinsch summed it up: “I think he was clear. I don’t think people paid much attention.” Now, they have no choice but to pay attention. The question is whether they can navigate this new landscape without being engulfed by the economic storm that has already begun to brew.
