From coffee to tomatoes: How Trump’s tariff U-turn is an admission that his trade strategy backfired

Now, you may be shocked to learn, Trump has been forced to revisit his original strategy—but only after he realized that Republicans were starting to pay a political price for his recklessness. In an order last Friday, Trump cut tariffs on agricultural products such as beef, tomatoes and java beans.

Predictably, the move came shortly after an election that showed Democrats handily beating Republicans in gubernatorial elections that revolved, in part, around voters’ affordability concerns.

Rolling back agriculture levies is a sensible first step towards acknowledging that the tariff policy was flawed from the outset, but it’s woefully insufficient.

Consider what’s happened to US inflation since Trump’s ‘Liberation Day’ tariffs went into effect. On the whole, year-on-year inflation is running at around 3%, up from 2.4% in March. About half of the increase is attributable to trends in ‘core goods’ (household furnishings, auto parts, vehicles, etc), the clearest evidence of where Trumponomics is hurting American wallets.

The rest of the inflation increase stems from energy prices (electricity and piped gas), which may have more to do with the data-centre boom than trade.

Food prices are increasing, too, but they’ve made a negligible contribution to the uptick in inflation overall. Still, groceries are more salient when it comes to sentiment than many other products.

Because we repeatedly return to the supermarket and buy similar baskets of goods, we’re more likely to notice when prices rise a lot. From the beginning, it was obvious that tariffing agricultural products was as politically foolish as it was economically self-sabotaging. That becomes especially apparent as we move deeper into the winter months, when ‘homegrown’ alternatives will become harder and harder to come by.

Consumers may not immediately notice when the price of some intermediate good rises and subtly curbs American dynamism, but they do notice what they spend on groceries.

Take coffee, for example. Hawaii is the only state with major coffee-growing operations; the rest of our supplies come from countries like Brazil and Colombia. The plants require warm and wet climates and thrive in rich volcanic soils that most of America can’t provide.

Tariffs were never going to bring more production back stateside. In the contiguous US, California and Florida may be the only viable alternatives one day, but their competitive advantages are tech startups and multi-million-dollar condominiums, respectively, not low-margin agriculture.

Tomatoes are another example of a crop for which the Trump administration has extended tariff relief—and none too soon. They grow in the US in the summer, but most of the winter supply is imported, and maintaining high tariffs through the frigid months was a great strategy to boost salad prices while helping absolutely no one.

Trump’s tariff rollback on some grocery items is welcome, but not nearly enough to assuage consumers, who have lived with broad-based inflation for the better part of five years and will struggle to keep up as the cooling labour market augurs lacklustre wage growth ahead.

Fortunately, a broader reprieve may yet be coming. The administration has used the International Emergency Economic Powers Act (IEEPA) to implement its sweeping duties while bypassing Congress, arguing that deficits are a national security emergency. In the Supreme Court, where a case challenging the legality of the tariffs is underway, a number of justices seemed sceptical of that line of argument. It’s possible that the Trump administration could lose its broadest tool.

That doesn’t mean that a determined Trump administration can’t forge ahead with tariffs some other way, but it would be forced to go through more rigorous procedures. Under one scenario, his team could launch investigations on an industry-by-industry basis. In another, they could coerce Congress into acting. All in all, while tariffs may remain higher than we’re used to, that process could produce an outcome that at least has some semblance of a strategy behind it. At the moment, we can’t even say that.

For now, Trump’s latest walk-back on agriculture products is a tacit acknowledgement of how absurd the current policy is. It’s also a cynical recognition that economic outcomes are still secondary to politics and public perception. ©Bloomberg

The author is a columnist focused on US markets and economics.