White House Barrels towards April 2

President Donald Trump has announced that broad reciprocal tariffs and sector-specific tariffs scheduled to take effect on April 2, will have "flexibility," as the drumbeat for exceptions and special treatment builds.

“People are coming to me and talking about tariffs, and a lot of people are asking me if they could have exceptions,” Trump told reporters in the Oval Office.   “And once you do that for one, you have to do that for all,” he said.

“I don’t change. But the word flexibility is an important word,” he said. “Sometimes it’s flexibility. So there’ll be flexibility, but basically it’s reciprocal.”

Under the President’s reciprocal tariff plan,  each US trading partner will be presented with a tariff rate that takes into account not just the tariffs they impose on US imports but various non-tariff barriers, Treasury Secretary Scott Bessent said. Countries will be given the option to avoid the higher US tariffs by negotiating down their own rats, along with agreeing to curbing non-tariff barriers, he said in an interview on Fox News Business.

“We are going to go to them and say, ‘Look, here's where we think the tariff levels are, non-tariff barriers, currency manipulation, unfair funding, labor suppression, and if you will stop this, we will not put up the tariff wall,’” he said.

“On April 2, each country will receive a number that we believe represents their tariffs,” he continued. “For some countries, it could be quite low. For some countries, it could be quite high.” Mr. Bessent declined to say how high some countries’ new tariff rates might be, saying that it being decided by the Commerce Department and US Trade Representative.

China Talks on Tap

The US Trade Representative, Jamieson Greer will be speaking with his Chinese counterpart next week, according to Reuters.  No confirmation was received from the USTR or Chinese officials.

Alan Beattie of the Financial Times criticized the administration’s policy direction as disorganized, noting: “Further evidence that the Trump tariff policy is genuine chaos… arrived last week via anonymously sourced news stories of administration infighting.”

Beattie dismissed claims of strategic coherence, citing one official’s rebuttal—“The only one who thinks it’s chaotic is someone who’s being silly”—as unconvincing. He added that Republican legislators appear unwilling to oppose the president’s agenda: “Supine Republican senators and congressmen are highly unlikely to make a big fuss about Trump’s trade war.”

Sectoral Impacts and Foreign Reactions

The planned 25% tariffs on auto imports will not exempt Japan, as confirmed by Commerce Secretary Howard Lutnick, who linked the measure to efforts to reduce the U.S. trade deficit. At the same time, Tesla has expressed concern in a letter to the U.S. Trade Representative, while the National Coffee Association has requested exemptions.

U.S. tariffs threaten half of Mexico’s exports, with limited concessions offered. Meanwhile, the Office of the U.S. Trade Representative is moving to impose fees of up to $1.5 million on Chinese-built ships docking at U.S. ports.

The American Chamber of Commerce to the European Union warned that tariffs could damage transatlantic investment, not just trade: “They could also harm trans-Atlantic investments, which are more than three times as valuable.” .

In the Senate, Angela Alsobrooks (D-Md.) introduced the Tariff Transparency Act, mandating an investigation by the U.S. International Trade Commission into the effects of tariffs on consumers, businesses, and industries, particularly regarding imports from Mexico and Canada.  

Currency Effects

Treasury Secretary Scott Bessent predicts that Chinese manufacturers will absorb the tariffs, anticipating exchange rate adjustments: “I believe that the currency adjusts.” Bloomberg analysts expect reciprocal levies targeting value-added taxes to reach 20–25% or higher, raising questions about the scale of required dollar appreciation.  

One way to induce an offsetting spike in the dollar exchange rate would be for the Federal Reserve to sharply increase interest rates, although that would be at odds with conventional policy in a slowing economy, and would further strain the Fed's relations with an already disenchanted President.