‘A new world’: Trump’s tariff regime takes effect

Good morning and welcome to White House Watch! For today:

• A new tariff era

• A Trump-Putin summit

• We need to talk about Kevins

It’s official: Donald Trump’s new tariff regime has begun.

The global levies went into effect at 12.01am in Washington today, putting the US’s effective tariff rate at its highest level in decades despite frantic lobbying by US trading partners.

Swiss President Karin Keller-Sutter left Washington yesterday empty-handed after making a last-ditch attempt to evade some of Trump’s harshest tariffs.

The new global trade order comes after months of threats and U-turns as the US president moves to reshape the international system. Almost all foreign countries are being hit with so-called reciprocal tariffs, even ones that struck new trade deals with the US, such as the EU and Japan.

And more pain looks to be on the way.

Yesterday, Trump said he’d impose a 100 per cent tariff on chip imports, although some companies with US investments would be exempt.

The president is also still willing to use trade to pursue geopolitical goals: he hit India with further 25 per cent tariffs to punish New Delhi for buying Russian oil, as he tries to pressure Moscow into ending the war in Ukraine.

“You’re going to see a lot more” secondary sanctions on countries buying Russian oil, Trump told reporters in the Oval Office yesterday.

As US trading partners brace for enforcement of the new regime, Trump has hailed his tariffs for bringing “trillions of dollars” into America.

“This is a big deal, in the sense that there are new official tariffs,” Ted Murphy, a trade lawyer at Sidley Austin in Washington, told the FT’s Aime Williams. “This is the dawn of a new trade order, and the end of an old order.”

Chad Bown, senior fellow at the Peterson Institute for International Economics, said: “We are now in a new world. Even to trade nerds, the complexity of this is just bonkers.”

The latest headlines

• Trump signed an executive order to open the $9tn US retirement market to crypto and other alternative investments such as property deals, in a move that will reshape how Americans’ savings are managed.

• Russian leader Vladimir Putin will hold talks with Trump as early as next week, the Kremlin said this morning. The location of the meeting had already been agreed and would be announced later, Putin aide Yury Ushakov told reporters.

• The US president vowed to impose a 100 per cent tariff on semiconductor imports, but said companies such as Apple that invested in the US could avoid the levy.

• Trump’s shock move to fire the head of the Bureau of Labor Statistics has exposed deepening fissures within the data agency that is key to measuring the strength of the US economy. [Free to read]

• A new ICE detention centre in a small Georgia town will bring much-needed investment, but many in rural Folkston are against the facility and worried about the town’s reputation. 

What we’re hearing

Kevin Hassett and Kevin Warsh have emerged as the favourites in the race to become the next chair of the Federal Reserve.

When I asked Trump yesterday if Hassett and Warsh were the top contenders, he said: “The two Kevins are absolutely, yeah. They’re both very good.”

He also said the interview process for Fed chair had begun, and that “it’s probably down to three” candidates. 

Hassett is the director of the White House’s National Economic Council, and Warsh is a former Fed governor who narrowly lost out on the chair job to Jay Powell in 2017.

“The odds are pretty high that [it] will be one of the two Kevins,” Stephen Moore, an economist with close ties to Trump, told the FT’s Claire Jones. “Trump respects them both, and he likes them both.”

Beyond the Kevins, Christopher Waller, who was appointed to the Fed board by Trump during his first term, is also considered by many investors and economists to be a candidate.

Trump is at present considering who to place on the central bank’s board after a seat opened up with Adriana Kugler’s unexpected resignation on Friday — and he wants his pick to be aggressive about interest rate cuts.

He could use the seat to put in place a so-called shadow chair who would eventually replace Powell in the top job. But yesterday, Trump said “we’re probably going to go with a temp” until Kugler’s term is up in January, then nominate a “permanent” candidate who would use the seat to become the new chair.

That would give Trump more time to decide who he wants to helm the Fed beginning in May 2026. 

Plus, neither Kevin would be likely to settle for a short stint in Kugler’s seat, which could instead go to long-shot candidates for the chair job.

“With Trump, I would never completely bet against some outside choice we’re not even talking about. But in this case, he’s been pretty adamant that it’s going to be two or four people,” said Moore.

Viewpoints

• Former Bureau of Labor Statistics commissioners Erica Groshen and William Beach say Trump’s firing of Erika McEntarfer is a “disastrous ‘cure’ for an imagined problem”. 

• The tech industry is getting special legal treatment from Trump that it does not deserve, argues American University law professor Hilary Allen.

• Janan Ganesh is betting that this summer will be Trump’s presidential peak, and it’s likely to be all downhill from here.

• There’s a new way into the so-called Trump taco trade as the president uses trade policy on Brazil to make political demands, Pan Yuk tells us in her latest Lex column.

• Behind the scenes, Trump is working with Congress to enact sweeping reforms to cut back wasteful spending that have long had bipartisan support, writes Dan Lips, a former Capitol Hill policy official.