Since the announcement of “Liberation Day” on April 2nd, financial markets have seen a sharp response. The S&P 500, NASDAQ, and Brent crude have each fallen by more than 10%. In contrast, gold has surged by a similar margin, reaching record highs. The VIX, a measure of volatility, is also elevated, signalling investor unease. President Trump may have anticipated some disruption, but the scale of the dollar’s slide likely caught even him off guard. Trade policy can be directed; market sentiment cannot.

The Trump administration’s trade strategy marks a sharp departure from the post–Bretton Woods orthodoxy that favours free trade as a driver of shared growth. To understand this pivot, it is useful to examine the coalition behind Trump’s mandate. His support base spans Silicon Valley entrepreneurs, asset-poor blue-collar workers, and rural conservatives, demographics with little stake in the status quo.

Tariffs are being deployed not just as economic tools but as political instruments. By raising import costs, the administration hits consumer goods most heavily concentrated in Democratic-leaning regions. If such policies result in jobs returning to the US, Trump’s support base benefits even at broader economic cost. Machinery giant JCB has already announced plans to bring some production stateside.

The administration’s early tariff moves appear designed to shock rather than target, an attempt to push trading partners to the table. Trump has long argued that the US has been taken advantage of. There is some truth to this. China and India, for instance, have maintained high trade barriers under their “developing nation” WTO status, long after such classifications might be warranted.

China is a particular focus, especially as it gains ground in high-tech sectors. Electric vehicles are a case in point. BYD, a Chinese automaker, recently launched a vehicle that transforms into a boat and can drive 500 kilometres after a five-minute charge. Western firms lag behind. Mercedes is closest, offering 300 kilometres of charge in ten minutes; Tesla still takes 15 minutes or more. From Washington’s perspective, tariffs in this case act as protection for a strategically important but lagging domestic industry.

Despite the initial drama, the longer-term strategy appears more measured. The administration is now pursuing bilateral deals with key partners including Japan, South Korea, Australia, and the UK. Progress is uneven. A new EU deal is likely to take time, though the UK has already signalled openness to dropping its digital services tax—an early win for American tech firms.

Australia finds itself balancing two allegiances: it relies heavily on China for trade—$212.7 billion or 26% of its total last year—yet remains a cornerstone of US strategic policy in the Indo-Pacific. Washington is unlikely to sever these economic ties but may seek to limit their growth.

India, too, is in focus. Trump aims to challenge its longstanding trade protections, and negotiations are already underway. New Delhi appears open to recalibrating its WTO status, though changes will be incremental.

Japan exports heavily to the US and is its largest foreign creditor, holding over $1 trillion in US Treasury bonds. Any deal must delicately balance reducing auto imports with maintaining Tokyo’s willingness to finance American debt.

South Korea, where US troops remain stationed, is also in talks. Yet with a presidential election looming on June 3rd, final decisions are unlikely until after the vote.

Latin America, once firmly within Washington’s trade orbit, has shifted towards Beijing. China is now the region’s leading trading partner. The US will likely use upcoming negotiations to rebalance trade flows and curtail China’s growing influence. Such efforts are not just economic, they are strategic. As countries trade more with China, they also shift their financial allegiances.

The most complex negotiations will come with China and the EU. These talks are likely to be drawn out, not least because both pose deep structural challenges to US economic competitiveness. But as bilateral agreements begin to materialise, the volatility that has defined the markets since early April may ease.

Whether the strategy leads to a stronger economy is uncertain. What is clearer is that for President Trump, success is defined less by macroeconomic outcomes and more by tangible wins for his electoral base. If his supporters gain and rivals falter, that alone may be seen as justification enough.