[Trump Strategy Series ②] The Illusion of Package Deals and Energy Dominance
Trump's tariff strategy was not merely a tool for trade adjustment. It formed part of a complex scheme encompassing tax cuts, energy diplomacy, alliance reshaping, and fiscal recalibration. Yet, the result was a series of cascading consequences: internal clashes, miscalculations, and market distrust. This post examines Trump’s layered objectives, the strategic failures behind them, and the rise of Bessent in contrast to Navarro’s fall.
🧨 Cabinet Confusion and Breakdown of Control
Trump often announced policies on impulse—without scenario planning or economic impact assessment. As a result:
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Announcing the unexpected = sign of negotiation
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Yet outwardly, he kept saying “There will be no negotiations”
This was a political performance that weaponized shock and fear. Internally, it left the Cabinet split and powerless.
📌 The Multi-layered Objectives of Trump's Tariff Strategy
Trump aimed to achieve several objectives simultaneously through his tariff policy:
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Secure tax revenue and enable tax cuts: Deferred 25% retaliatory tariffs, but maintained a 10% baseline tariff
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Attract manufacturing investment: In sectors like semiconductors, autos, pharmaceuticals, biotech, steel, and aluminum
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Improve trade balance and check China: By blocking indirect exports and demanding import levels equal to trade deficits
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Control inflation, the dollar, and interest rates
However, these goals often contradicted each other. By pursuing all at once, the policy became overreaching and unmanageable.
🎯 Trump's Vision of a Package Deal
Trump rejected issue-by-issue negotiation in favor of “One Stop Shopping” diplomacy—a model that merged economic, energy, and security issues into a massive, single-deal framework.
For example:
He attempted to negotiate tariffs alongside LNG imports, defense cost-sharing, and pipeline projects in one package.
This approach reflected a transactional mindset, with Trump believing he could extract broader concessions through bundled pressure.
🔥 Energy Dominance Entwined with Trade Strategy
Trump’s strategy extended beyond retaliation. He sought to merge U.S. energy exports with trade policy. When the EU proposed tariff elimination, Trump rejected it and instead demanded increased LNG imports.
His intended outcomes:
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Higher energy exports → improved trade balance → dollar stability
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Reduction of a $350 billion trade surplus with the EU
Markets responded with record highs in energy sector stocks. However, this model could not be applied to consumer goods:
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Demanding “Buy American cars” was unrealistic
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Cars are consumer items—not easily swayed by security-linked negotiations
📉 Forecast Failures and Market Blowback
Trump’s tariff strategy aimed to trigger two outcomes:
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Lower interest rates
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Lower oil prices
Both initially declined, seemingly validating the plan. But warning signs emerged in the bond market:
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10-year Treasury yields rose
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SLR rule changes enabled major banks to expand Treasury holdings
Hedge funds, anticipating persistent Treasury demand, took on 50–100x leveraged long positions. But post-announcement, the market reversed:
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Tariffs signaled economic slowdown → projected fiscal deficit growth
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Result: More bond issuance + rising inflation → long-term rate spikes
This left hedge funds facing portfolio collapses and pointed toward a policy misfire spilling into financial instability.
🧭 Bessent’s Rise, Navarro’s Collapse
After the policy backlash, Peter Navarro’s influence waned. In contrast, Treasury Secretary Bessent gained market trust and assumed a supra-ministerial role, even leading trade deal negotiations—effectively sidelining the Commerce Department and USTR.
Navarro’s argument for tariff-driven disinflation:
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Export-dependent nations would lower prices because they “had no choice”
But this logic ignored market mechanics. Most exporters have a 10% margin buffer, but beyond that, prices inevitably rise. Even Elon Musk criticized Navarro for misunderstanding free-market principles.
✅ Conclusion: Loyalty, Failure, and Face-Saving
Trump’s tariff play wasn’t about economic gain—it was a performance crafted for negotiation optics.
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The policy failed
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The market turned away
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Bessent cleaned up the aftermath
In the end, this was the story of a loyalist’s fall and a competent aide’s rise. Once again, Trump’s strategy collapsed into an administrative theater staged for political face-saving.
