Trump’s Latest Tariff Walk Back Sparks Relief — And Warnings

President Donald Trump is still using tariffs to try and force allies and foes alike to bend to his will. But unlike earlier in his term, he isn’t following through.

In the last three months, Trump has announced plans to raise levies on various countries — Canada, China, France — at least five times in an attempt to force countries to bend to his foreign policy goals. Not only has the White House not executed those tariffs, but it has pulled back other existing or planned duties on certain foods, furniture and computer chips to address concerns about domestic prices.

Trump’s latest — and most high-profile — walk back, on tariffs he had threatened on eight European countries over Greenland, comes just one day after markets plummeted on the news of a potential transatlantic trade war. Treasury Secretary Scott Bessent spent much of Tuesday trying to argue that the markets were spooked over Japanese bonds, not Greenland, but Trump’s own remarks at the World Economic Forum in Davos, Switzerland — coupled with the tariff reversal and an ensuing stock market rally — suggest otherwise.

For Trump, it underscores the diminishing returns and growing risks of wielding his favorite diplomatic tool in 2026, in the build-up to midterm elections that are expected to hinge on the economy and cost-of-living pressures that would be exacerbated by new trade wars and market instability.

“The affordability issues have become a huge problem that they have to grapple with,” said a former USTR official who currently lobbies the administration on trade policy and was granted anonymity to speak candidly. “The public has linked tariffs and affordability.”

But while business leaders are relieved the White House has pulled back from its most extreme tariff plans, they caution that there are economic consequences from the whiplash. Even some of those closely aligned with Trump are warning that the threats, alone, are taking a toll — especially when directed at the country’s most reliable trading partners.

“The erosion of sentiment in allied countries toward doing business in the United States is real,” said U.S. Chamber of Commerce Executive Vice President Neil Bradley. “That alone carries consequences.”

Over the past few months, Trump has pulled back on several of his signature tariffs, exempting more than a thousand agricultural goods that can’t be grown in the U.S., while also pausing scheduled tariff increases on consumer goods like upholstered furniture.

Trump also delayed potentially broad tariffs on critical minerals and semiconductors last week, instead focusing executive orders on building a domestic supply chain. The White House, meanwhile, has yet to impose any of the duties Trump has announced on social media over the past several months: on any country doing business with Iran; on Canada in retaliation for an anti-tariff ad that played during the World Series; and on French wine and champagne, which has not yet been applied.

White House aides argue Trump only backed off of his pledge to impose tariffs over Greenland because he had gotten what he wanted: a “concept of a deal” on “something having to do with the Arctic as a whole,” as Trump described it to CNBC on Wednesday. That, however, sounds quite different from “the Complete and Total purchase” of Greenland that he demanded over the weekend.

They also reject the idea that the president has been at all inconsistent in his use of tariffs more generally, arguing that Trump is following a familiar playbook: threaten tariffs, extract concessions and then strike a deal. Exhibit A: Trump’s September threat of a 100 percent tariff on name-brand medications, which led to pricing deals with individual drug companies.

“The average tariff imposed by America has increased by almost tenfold under President Trump, who has used tariffs to secure over a dozen trade and peace deals across the globe,” said White House spokesperson Kush Desai. “While President Trump is always looking to strike a deal, he has repeatedly proven that he is not afraid to use every tool at his disposal to put Americans and America First.”

Stock traders have come up with a less charitable term for it — TACO, short for “Trump always chickens out.”

“He talks the toughest right before he folds,” said William Reinsch, a trade policy expert who served as undersecretary of Commerce for export administration during the Clinton administration. “This is why somebody came up with the TACO acronym last year.”

Markets remained relatively stable for the second half of 2025, despite the uncertainty over the president’s trade agenda, in part because of that belief.

Yet the events of the last week rattled the business community, which had welcomed the relative calm — and lack of tariff increases — over the past several months, after a year of rapid fire tariff threats and hurried trade negotiations.

The “rapid escalation of retaliatory tariff threats on both American‑made and imported spirits is creating significant uncertainty for our industry at a moment when domestic spirits sales and exports are already in decline,” lamented Chris Swonger, president and CEO of the Distilled Spirits Council of the United States.

The United States’ $1.5 trillion trade relationship with Europe is also looking increasingly fragile, with EU diplomats saying they believe the tariff threat violated the terms of the trade agreement they reached with the U.S. last summer. The European Parliament this week paused the ratification process for the agreement in response to Trump’s Greenland tariff threat. Trump administration officials had already been chafing at the Europeans’ slow pace.

“Europe has done nothing to implement the trade deal. Nothing,” U.S. Trade Representative Jamieson Greer said in Davos earlier this week. “Europeans have not lowered a single tariff for us. They have their process, I understand they have their process. My point is the action doesn’t change the status quo of outcomes.”

Speaking at an event hosted by Axios on Wednesday, Greer also dismissed complaints that Trump was reneging on the broader trade agreement: “We have a trade deal we agreed to last summer with the EU. It was not comprehensive. It was not a deal that said, you know, ‘Here's a deal, and if there's any other issues, we just won't raise them. We won't talk about them and pretend they don't exist.’”

But some outside observers say Trump’s latest actions are likely to raise questions among other trading partners and businesses about the durability of their trade agreements with the administration.

“I do think this whole episode is unfortunately likely to leave some lasting damage in terms of the loss of trust,” said Peter Harrell, who served as senior director for international economics on former President Joe Biden’s National Security Council. “Not just by foreign government officials, but by global investors that are beginning to worry a bit more about U.S. political risk.”

Indeed, a Danish pension fund, AkademikerPension drew headlines (and a tart rebuke from Bessent) this week when it announced plans to sell all of its U.S. holdings.

At home, Americans continue to fret about high costs. Consumer sentiment is down 25 percent from last January, according to the University of Michigan’s survey. And while Trump continues to dismiss affordability concerns as a “hoax,” White House chief of staff Susie Wiles told reporters this week that the president plans to scale back his international travel in the near future and instead make weekly trips to different parts of the U.S. to tout his economic record.

Stephen Lamar, the president of the American Apparel and Footwear Association, suggested the president reflect on how his recent series of tariff threats affect that economic vision.

“Tariffs are ultimately a tax on American consumers, American businesses and the American workers employed by those businesses,” said Lamar, whose trade association represents major clothing brands like Ralph Lauren and Levi Strauss. “Given these stakes, tariffs should not be used as a foreign policy tool without a consensus between Congress and the administration and well-articulated, widely shared policy goals.”

Ari Hawkins and Doug Palmer contributed to this report.