The U.S. and China’s Tariff Rollback / Qatar Offers Trump a Jet
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From the opinion pages of the Wall Street Journal, this is Potomac Watch. China and the United States strike a truce in their trade war and investors around the world love it. Stocks soared and the dollar rose after the second rollback in Donald Trump's tariffs in a week.

What's in this U.S.-China trade pact and what comes next? Plus, Donald Trump may accept a free airplane worth something like $400 million from the Middle East nation of Qatar to replace Air Force One. Is this kosher ethically or wise politically? Those are our subjects for today on Potomac Watch, the daily podcast of Wall Street Journal Opinion. And I'm here with my colleagues, Alicia Finley.

and Joe Sternberg. So it was another slow news weekend with more epic decisions on a whole variety of subjects. China trade, the biggest market mover.

What amounts to essentially a de-escalation in the trade war. The two countries will pare back tariffs for 90 days. The US will remove its 145% tariff rate on Chinese goods. What remains will be 10% base tariff that Trump is imposing on all goods from all countries, plus another 20% levy ostensibly to punish China for its role in the fentanyl trade.

for a total of 30%. In exchange, China will go to 10% for the 90 days from 125%. Let's listen to the president explain the deal and the negotiations in Geneva. - The talks in Geneva were very friendly. The relationship is very good. We're not looking to hurt China. China was being hurt very badly. They were closing up factories. They were having a lot of unrest. And they were very happy to be able to do something with us.

And the relationship is very, very good. I'll speak to President Xi maybe at the end of the week. So it's all terrific, Joe. What do you make of this? Well, I think for years there have been big problems in the trading relationship between the U.S. and China. I think Americans worried about national security issues surrounding Chinese investment in the U.S. American companies have complained about things like intellectual property theft.

in market barriers in China. And none of that has actually been resolved as a result of this tariff escalation. So if this was all negotiating strategy on Trump's part, it's hard to see what has actually been negotiated here. I think the real issue

Conclusion that Trump eventually came around to was the discovery that these two economies, for better or worse, are deeply intertwined with each other and that there were enormous costs lurking for the US economy if you attempted what was essentially a forced decoupling overnight. So I think what's happening is that Trump is bowing to reality and using the opportunity of these negotiations over Geneva to take that opportunity.

off-ramp and de-escalate a little bit and try to save some face. Alicia, it was pretty clear that there was real damage coming to both sides. I think it's fair to say the US was going to face shortages of various goods from China, particularly consumer goods, which were already showing up in some shortages in some places. Also, components for small business and various businesses for which...

China was the only supplier. Now, China also was getting hit. There were layoffs. It's hard to tell because the Chinese economy is opaque and they're famous for not really reporting honest numbers. But it's clear that they were facing some trouble as well. So there was incentive for both sides to de-escalate. But as Joe suggests, other than the 90-day let's back off, right?

There's no real trade breakthrough here in any kind of substantive issue other than a reduction in the tariffs. Right. And I think we should look at this as reprieve. We don't really know what's going to happen in 90 days. Maybe they'll make progress. Maybe they'll extend the 90-day pause. I think that's probably the most likely because if the tariffs ratchet back up to 145%, 125%, you're going to continue to see that decoupling or halts, pauses at the

ports, a complete slowdown in trade. And as you mentioned, you'll continue to see shortages ripple through the economy right now. What I would expect is that a lot of companies are going to use that 90-day pause to stock up on inventory. And so you're actually probably going to see another increase in the trade deficit, just like we did in March and February after Trump threatened it and slapped the tariffs on. The other thing we don't really know about

besides just the tariffs, is the other retaliatory measures that China took after Trump imposed the tariffs. And that includes the export controls for rare earth minerals that U.S. businesses are reliant on. It also started to invest antitrust investigations into some companies like DuPont. So China still has a lot of leverage over the U.S. if it doesn't extend the pause.

Yeah, that's pretty interesting because I didn't see anything like that in the announcement about those China non-tariff actions. And you would think, Joe, that if those were part of this de-escalation, the president would have touted it or Scott Besson, the treasury secretary, would have touted it. Yeah, there's an interesting contrast here in that regard to the deal with the United Kingdom that the Trump administration rolled out last week because what happened there is again,

So if you had the strategic reduction of some tariffs, of course, the general rate on the UK was 10%. It was not nearly as high as in the case of China. But that deal did reduce some of the industry-specific tariffs like autos and steel that had been higher in exchange for some regulatory changes around the edges that were significant.

substantial, but not necessarily big enough to be justified by the damage of the trade war. Here, we don't have any of that. And I think partly it might be reflective of the fact that the trade issues that do exist between the US and China have been going on for a much longer time and are much more intractable because China is such a different

economic system being managed by the Communist Party-run government in a way that the US market economy isn't managed. And I think also reflective of the fact that tariffs that Trump had imposed are much higher, that created a much greater sense of urgency for the sake of the economy to do something about ratcheting them down. And you couldn't necessarily wait for progress on some of these regulatory and other issues

without that economic harm to the US side really becoming a major problem. All right. So let's take stock that since the beginning of the Trump tariff barrage here in his second term, here's examples of how he's walked things back. First of all, exemption for Canada and Mexico on goods that are produced under the USMCA. Then a 90-day pause on all of his April 2nd so-called Liberation Day reciprocal tariffs, except on China.

Then exemptions on the China tariffs for electronics and other goods that they tried to slip through the customs department on a Friday night.

Then the last week, the British trade deal that rolled back some tariff barriers between the US and UK. And now I'll walk back for 90 days on the reciprocal tariffs on China. Okay. What does that tell you, Alicia, about what's left of the Trump trade agenda? Is this an admission of defeat, obviously, without the rhetorical admission, but de facto? Or is this just a series of tactical retreats while we wait to see if the economy can withstand

I think it's a little bit of both. I think it is an admission that the tariffs are having a harmful effect. They're creating uncertainty. The markets responded, they sold off, and then that I think spooked Trump a little bit. And so he has made these tactical retreats on these discrete issues.

I think we should expect more of those, but at the same time continues the uncertainty as well as threats of more and different kinds of sectoral tariffs. For instance, the pharmaceutical industries, he plans to do some kind of Section 232 tariffs within the next month, apparently, as well as Section 232 national security tariffs on semiconductors.

So I think that the damage in terms of the tariffs lingers because businesses can't invest because they don't know when a new tariff is going to get slapped on or if there's going to be another exemption. So it makes it very hard to invest. We're going to take a break and when we come back, we'll talk about where this U.S.-China trade de-escalation brings us to the larger Trump tariff strategy when we come back.

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Welcome back. I'm Paul as you go here on Potomac Watch with my colleagues, Joe Sternberg and Alicia Finley. Dan Clifton, analyst of revenues and spending taxes from the consulting group Strategas, says that Scott Besson, the Treasury Secretary, has now delivered $300 billion worth, Joe, of

border tax relief here in a couple of weeks. And tariffs are taxes. And these tariffs were our big taxes assessed at the border. That's a huge, huge

reduction in damage to the US economy. Yes, but I think that there's a caveat to that, which is the universal 10% tariff, which Trump is reverting to in most of these cases, is still substantially higher than before. So, I mean, you're moderating the tax increase by cutting several hundred billion dollars worth of tax off of that, but that's out of this hit that was

going to be substantially larger than that. And I think that that's the core of the economic and the political problem that the Trump administration is going to start facing here. I mean, what...

Ties together all of the walkbacks that you ticked off a moment ago, Paul, is this understanding that consumers are starting to face pain from these tariffs or are about to. So you have to cut the tariffs on the electronics because they're going to increase the prices that people have to pay for phones.

Or a bunch of these other things you can go down the list. I'm sure that one of the factors going on with China right now is an awareness that even though it's only the spring, the Christmas shopping season isn't that far away, or people going to have toys under the tree if you have suddenly decoupled from China.

So I think that the Trump administration is going to have to reckon with the fact that this is in fact a major tax increase and it's coming at a time when you are yet seeing definite progress on other tax reforms or relief from Congress on other fronts. And

It's just something that the economy doesn't need and the voters weren't looking for from a president they elected to fix inflation and get the economy firing on all cylinders again. Just on terms of the magnitude of your point on the 10% tariff increase, the average U.S. tariff

before this administration was 2.4%. That's the average across all tariffs in all countries. 10% across the board, that's four times higher. So that's a substantial increase. Now, two-way trade in goods is about 11% of the US economy. So it's not the whole economy, but it's a substantial portion of it. And those

higher costs flow through other parts of the economy. So right now, where we're left with, I think, is we're left with substantially higher costs from the tariffs, higher tariffs, but not as economically destructive as many had feared, still damaging. And the erosion

will come in the long term for the protected industries as they become less competitive. And then, of course, the uncertainty as it affects business investment and consumer confidence. All right, let's turn to another subject.

today, which is the news that the Trump administration is going to accept a gift, may accept a gift, the president says he will, of a very nice aircraft from the nation of Qatar. Some people say it's worth about $400 million, and it's going to substitute for Air Force One. Boeing has been very slow in delivering a new update on the current Air Force One.

The president says this is legally fine because the way this is going to be structured is the Pentagon will accept the plane in the short run here, that is during the Trump presidency, and then turn it over to the Trump Presidential Foundation where the president would have the ability to use it in his retirement from the White House.

Let's listen to the president talk about the jet. It helps us out because, again, we're talking about we have 40 year old aircraft. The money we spend, the maintenance we spend on those planes to keep them tippy top is astronomical. You wouldn't even believe it. So I think it's a great gesture from Qatar. I appreciate it very much. I would never be one to turn down planes.

that kind of an offer. I mean, I could be a stupid person and say, no, we don't want a free, very expensive airplane. But I thought it was a great gesture. And I think it was a gesture because of the fact that we have helped and continue to, we will continue to, all of those countries, Saudi Arabia, the UAE,

Qatar and others, we keep them safe. If it wasn't for us, they probably wouldn't exist right now. I think it's fair to say that from the point of view of Qatar, no doubt this is an attempt of goodwill purchase from the United States, whether it has anything to do with American military protection, I don't know. But the key question is, what do you make, Alicia, of this gift? Because it's not merely a gift to the government.

It's a gift for Trump under the terms that they have laid out of his use for the presidential foundation after his term in office. First of all, it's just a really bad look and is somewhat hypocritical as he goes after and his administration targets a lot of colleges for taking donations from foreign governments, including Qatar, Harvard, for instance. And so, I mean...

Why is it okay for him and his personal foundation eventually to accept this gift, but not for universities to accept similar donations from foreign governments?

And the concern is that this could influence his foreign policy, how he deals with these countries. Qatar is a major player in the negotiations between Israel and Hamas. It does rely on U.S. protection, military support. And so I think it's obviously assuming that it's going to get something in return. Maybe this isn't an explicit quid pro quo, but it's very implicit.

We're going to take another break. And when we come back, we'll talk more about the president's apparent acceptance of a $400 million aircraft from the government of Qatar to serve as Air Force One when we come back. You may get a little excited when you shop at Burlington. Hello, Price! Do you see that? They have my fund. It's like a whole new world. I can buy you! I'm saving so much!

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From the opinion pages of The Wall Street Journal, this is Potomac Watch.

Welcome back. I'm Paul as you go here on the Daily Opinion Podcast of The Wall Street Journal, and I'm here with Joe Sternberg and Alicia Finley. Joe, there's a little thing in the Constitution, it's called the emoluments clause put in there by the founders. It's Article 1, Section 9, and here's how it reads. "No person holding any office of profit or trust under them shall, without the consent of Congress, accept any present

emolument, office, or title of any kind whatever from any king, prince, or foreign state, end quote. Consent to Congress is a crucial part of that. Does this strike you, this, Jed, as a violation of the Emoluments Clause? It's an enormous problem. I mean, it is a constitutional problem, although I think we have to grant that that might turn out to be very difficult to enforce because presumably at the extreme, it requires Congress to launch an impeachment and

for better or worse, that doesn't seem very likely right now. But, you know, I think that that clause, just its existence was a recognition by the founding fathers that you have to be very careful about the appearances of these things. And you need to take steps, even if you aren't necessarily worried about impeachment directly, to try to avoid putting yourself in a situation where people will think, there's something a little off going on here. I mean,

This is the sort of thing that you would expect from a president in a banana republic to be engaged in this sort of intermingling of private and public benefits and this real blurring of the lines between what is a public good and what is a form of personal enrichment. And just sort of laundering all of this through a foundation sooner or later is the cherry on top for that sort of thing. And it's just so rich given that one of his campaign themes is

involved all of the allegations of corruption that's rolled around the Biden family. You know, now I'm not even sure that the Bidens were ever quite this brazen. Let's try to put the best gloss on this from the president's point of view, Alicia. Just think about it from that point. He says, well, look, we have an old aircraft, Air Force One. Boeing can't deliver it on time. It costs an enormous amount to keep it running.

Although, presumably, this new jet will also require maintenance. We want to protect the president. And hey, the government will have to pay for it, right? Qatar will give it to us. So we'd be fools not to take it. I gather you don't find that persuasive. But what do you think of that defense of it?

Well, at the same time, OK, if Russia were to offer us a similar deal, would we be fools not to take it? Right. There is there continues to be the concern about their buying something, essentially giving it to us in return for our favor, our expected favor. And then why does he plan to basically transfer it to his personal foundation, which is really it's not a benefit to the U.S. government. It's a benefit to Donald J. Trump. And to your point about the emoluments clause, this is kind of a case in point of what the founders intended to prevent.

Now, there was some lawsuits by the House of Democrats in President Trump's first term involving his clubs hosting foreign dignitaries. I thought that was a little dubious as an accusation that that violated the emoluments clause. And it was eventually thrown out because it was ruled that they didn't have standing to press this claim. But I think he's really kind of playing with fire, inviting trouble, much like he and his family are doing with their various crypto ventures.

Yeah, those first term emolument claims struck me as really not very persuasive by the Democrats because they were doing the normal business. Okay, people need to come into the United States. They were staying at the Trump Hotel. It was the course of normal trade, normal diplomacy and so on.

I don't think it was a violation of the emoluments clause. This is so large and kind of so directly to Trump via the Pentagon for four years. It's such a direct benefit to the president personally.

That does strike me as a violation, but I guess the problem is who would have standing to sue? And you're right, Joe, I think that the remedy here would have to be impeachment. That's not going to happen. But, you know, I think the best outcome here would be for Republicans to

Democrats are going to criticize it. That's not going to matter. But if Republicans start to criticize it and say, look, Mr. President, you should just say no to this. It's demeaning to the United States to have a foreign country like this donate something. Air Force One, the symbol of Air Force One, really just don't take it.

I think that might change his mind. Look, I get it. I think we can all agree that it is disgraceful that it takes us this long to build an airplane for the president. And, you know,

It's the sort of thing that we should be able to afford as the world's most prosperous country. So, I mean, if you want to have an argument about why it is taking so long to do projects like this, please do. But I think that the other point that Republicans have to hammer home quite apart from the sort of political appearances and the allegations of corruption front is also this issue that Qatar is in a special camp because it has...

a bunch of complicated relationships in the region, including with potentially regimes like Iran or groups like Hamas. It can be difficult to know sometimes exactly how friendly or how adversarial the U.S. should be with them. And it is not helpful in that kind of situation to have this sort of issue hanging over there. And, you know, Trump seems to

I think at least in the clip that we just heard, this is sort of more of a thank you from the Qataris for American security guarantees. But when it comes to Trump and quid pro quo arrangements, I'm not always sure if he understands when he's the quid and when he's the quo. And that's a question Republicans should really be interested in sorting out here. All right. Thank you, Joe. Thank you, Alicia. We'll leave it at there for today.

Thank you all for listening. We're here every day on Potomac Watch. Hope you'll be with us tomorrow.