Trump Tones Down His Tough Talk Amid Economic Warnings

Reuters
By Yuval Rosenberg and Michael Rainey

Happy Wednesday! On this date in 1635, the Boston Latin School was established, becoming the first public school in what would become the United States. Here's what's happening today.

Trump Tones Down His Tough Talk Amid Dire Economic Warnings

President Donald Trump is softening his stance, or at least his rhetoric, on a couple of major issues that rattled markets and roiled global economies.

Trump on Tuesday backed away from the possibility that he might fire Federal Reserve Chair Jerome Powell, insisting that he has "no intention" of doing so despite a social media post last week in which he said that "Powell's termination cannot come fast enough!" and another post this week calling the Fed chief a "major loser." Trump continues to call for the Fed to lower interest rates, and he reiterated Wednesday that he thinks Powell is keeping interest rates too high.

Trump also seemed to ease up on his trade war. At a White House event, the president told reporters that his massive 145% tariffs on China won't stay at that level. In response to reporters' questions Trump said: "145% is very high and it won't be that high. No, it won't be anywhere near that high. It'll come down substantially. But it won't be zero."

The Wall Street Journal reported that the Trump administration is considering cutting tariffs on Chinese imports, with one official reportedly saying they were likely to fall to somewhere around 50% to 65%. The administration reportedly is also considering a tiered approach for different categories of goods.

A warning from top CEOS: Trump's notable change of tone Tuesday came after he reportedly heard a harsh warning in the Oval Office on Monday from the CEOs of four retail giants: Walmart, Target, Home Depot and Lowe's. The executives told Trump that his trade war and tariffs could raise prices, disrupt supply chains and leave their shelves empty, Axios reported. Once source told Axios that the CEOs said the disruptions could be noticeable in just two weeks' time.

Treasury Secretary Scott Bessent reportedly played a key role in arranging the CEO meeting to underscore to Trump the economic challenges he's creating. Bessent said at a private JPMorgan Chase conference on Tuesday that the trade war with China is not sustainable and that "there will be a de-escalation" soon.

Trump told reporters outside the White House on Wednesday morning that tariff negotiations are going "very well" - "We have a lot of action going on," he said - even as talks with China reportedly have yet to get underway. "We are going to have a fair deal with China," he said, again claiming that his tariffs would raise enough revenue to allow the country to "substantially lower taxes when this is finished."

China has reportedly shunned tariff negotiations and instead has slapped 125% retaliatory tariffs on U.S. goods and "launched a diplomatic charm offensive," as CNN put it, to push back against any effort to isolate it economically.

Eyeing a 'big deal': Stocks rallied for a second straight session as investors welcomed any indication of detente, though the major indexes retreated from their highs of the day after Bessent told reporters that a "full rebalancing" of trade between the United States and China could take two to three years.

In a speech at the Institute of International Finance conference, Bessent said the United States and China have an opportunity to work together if China is "serious" about restructuring its economy to be less dependent on manufacturing exports. "There is an opportunity for a big deal here, that the US is looking to rebalance to more manufacturing," Bessent said.

White House Press Secretary Karoline Leavitt told Fox News on Wednesday afternoon that "there will be no unilateral reduction in tariffs against China." She said the administration needs to see lower tariffs and other trade barriers from China. "The president has made it clear, China needs to make a deal with the United States of America, and we are optimistic that will happen," she said.

Bessent criticizes the IMF and World Bank: Bessent also had some harsh words for the World Bank and the International Monetary Fund, which he said are "falling short" and falling prey to mission creep. But he said that those institutions serve "critical roles" in the international economic system and the Trump administration is ready to work with them if they refocus. "America first does not mean America alone," he said in his remarks. "To the contrary, it is a call for deeper collaboration and mutual respect among trade partners."

**What it all means: **Trump may still harbor ambitions of reshaping the global economy, but that long-term vision continues to clash with the day-to-day distress and uncertainty caused by his policies - and the president has repeatedly shown he has limited appetite for that kind of political and economic pain or the markets' recent embrace of the "sell America" trade.

The result is whiplash that ultimately undercuts Trump's ability to negotiate the types of deals he keeps promising. "On China's social media platform, Weibo, Trump's remarks trended under various hashtags including 'Trump admitted defeat,'" The Guardian reported. CNN noted that the hashtag "Trump chickened out" garnered more than 150 million views,. And as you'll see below, polls for the first time since he took office in 2017 now find that most voters disapprove of Trump's handling of the economy. Still, the latest comments from Trump and his administration, while welcomed by investors, may not change much.

Trump Allies May Fight GOP Medicaid Cuts

House Republicans are eying major spending cuts as they look for ways to offset their still-developing package of tax cuts, and some of those spending cuts are expected to hit Medicaid. GOP lawmakers have started debating the potential political cost for those cuts, which will fall heavily on lower-income households - including some that strongly support President Donald Trump.

New polling data from McLaughlin & Associates, which has worked for Trump in the past, suggests that opposition to Medicaid cuts may run deep in pro-Trump households. According to new polls shared with Axios, a majority of voters express support for Medicaid, including 78% of those who support Trump.

The poll was commissioned by Franciscan Missionaries of Our Lady Health System, which has also hired Chris LaCivita Jr. as a lobbyist, Axios reports. LaCivita's father was Trump's 2024 co-campaign manager, suggesting that the health system is looking for ways to apply pressure internally in the Trump administration to help defend Medicaid.

A Trump administration insider told Axios that it would "be absolutely detrimental to Republicans to cut Medicaid," while noting that Trump has publicly pledged to protect the health program. The source also noted that the idea of slashing Medicaid funding comes from an older version of the Republican Party that Trump has largely superseded.

"If you talk to MAGA Republicans, no MAGA Republican wants to touch it," the insider said, referring to Medicaid cuts. "The only people who want to touch it are part of the old guard [GOP] establishment, who are becoming extinct. We don't own them, we don't want them in our party. Our people, our allies will be firmly against it."

Number of the Day: 3,622,673

Just over 3.6 million babies were born in the United States last year, up 1% from 2023, according to provisional data reported Wednesday by the Centers for Disease Control and Prevention. The fertility rate of 54.6 births for every 1,000 women ages 15-44, was up less than 1% from 2023's record low.

Trump Says He Would Support 'Baby Bonus' Payments

With some conservatives showing a growing interest in raising the birth rate for American women, President Trump says he supports a proposal for the federal government to provide bonus checks to new mothers.

"Sounds like a good idea to me," Trump said when asked about the idea in the Oval Office on Tuesday.

Earlier this week, The New York Times reported that Trump administration officials are discussing proposals for new federal programs that would support young families, in the hope that they would inspire Americans to have more children.

In one proposal, new mothers would receive $5,000 checks from the federal government. In another, scholarship money would be set aside for applicants who are married or have children. Another plan calls for the government to fund programs that would teach women how to track their menstrual cycles so they can more effectively plan pregnancies. And in a proposal that oddly echoes the pro-family stance of mid-20th-century authoritarian states, one proposal calls for the government to award a "National Medal of Motherhood" to women with six or more children.

The proposals are bubbling up from pro-natalist conservatives who extoll the virtues of family life, particularly in its traditional forms. Key figures in Trump's orbit have expressed support for larger families, including Vice President JD Vance, who said earlier this year that he wants "more babies in the United States of America," along with more "beautiful young men and women" to raise them, and DOGE leader Elon Musk, who reportedly has more than a dozen children by multiple partners.

It's not clear how long it will take for the Trump administration to develop a set of policy proposals, but an idea recently floated by Transportation Secretary Sean Duffy, who the Times reports has nine children, suggests the proposals could take surprising forms. Duffy wrote a memo earlier this year indicating that he wants to direct more federal money toward transportation infrastructure in areas that have higher marriage and birth rates.

In the meantime, we can expect Trump to continue talking up the idea of increasing the birth rate. "Fertilization," he said last month at a White House event commemorating Women's History Month. "I'm still very proud of it, I don't care. I'll be known as the fertilization president and that's OK."

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