The writer is a professor at Harvard University and former chair of the White House Council of Economic Advisers

A hopeful endgame for the tariff fiasco is making the rounds on Wall Street and in Washington. Donald Trump cuts quick deals with countries around the world, declares victory, and eliminates or dramatically reduces the “reciprocal” tariffs, leaving only the 10 per cent across-the-board ones plus miscellaneous others like steel and aluminium. The hope is that markets would cheer the certainty, businesses would return to planning for their futures, and everyone could turn their attention elsewhere. That this settlement would be viewed as a victory shows just how far and how quickly the Overton window — or policy ideas regarded as acceptable — has shifted to a tariff rate that would put the US on par with Iran and Venezuela. 

Consider that all of this started with an average tariff rate of 2.5 per cent in 2024, a rate that itself was elevated by the tariffs that Trump imposed in his first term and that Biden then added to. Most analysts — myself included — thought that market pressure would force Trump to scale back once he returned. Investment banks were bandying around scenarios like a 5 percentage point increase in the average tariff rate.