Trump wins his first trade war

The Madman Theory passes an early test.

Good morning! It’s Monday, January 27, 2025. The 2026 midterms are 645 days away. Happy Birthday to Chief Justice John Roberts, who turns 70 today.

Colombian President Gustavo Petro at his 2022 inauguration. (Photo by the State Department)

President Trump’s flurry of initial executive actions covered topics ranging from energy policy to TikTok — but conspicuously stopped short of imposing any new tariffs, or taxes on imported goods coming into the U.S., which Trump has long viewed as his preferred source of government revenue and a key cudgel for getting his way on the world stage.

Instead, he signed an executive order directing his administration to “investigate the causes of our country’s large and persistent annual trade deficits in goods…and recommend appropriate measures, such as a global supplemental tariff or other policies” (bureaucratic-speak for “we’re buying time because we’re not ready do this yet”) and announced that the North American tariffs he had promised for Day One would be imposed by February 1 (although it is unclear if he will do so).

Then, on Sunday afternoon, Trump suddenly appeared to be hours away from implementing the first tariffs of his second term, to punish Colombia in a dispute over deportations. By Sunday night, however, the trade war had fizzled as quickly as it started, as Colombia’s president backed down in the face of Trump’s threats. Here’s what happened:

When the U.S. deports unauthorized migrants, it has long been national policy to transport them back to their country of origin. But what happens if those countries don’t accept them?

That’s the thorny question that emerged last week after Trump’s deportation flights kicked off. Three flights, carrying a total of 265 Guatemalans, touched down in Guatemala without any controversy — and, according to the White House, four flights carrying Mexicans touched down in Mexico, apparently after a brief diplomatic dust-up.

Next, two flights carrying Colombians had been slated to arrive in Colombia on Sunday morning; according to documents reviewed by CNN and the Wall Street Journal, the government of Colombian President Gustavo Petro had authorized the flights to land.

As the flights were in the air, however, Petro — Colombia’s first leftist leader — revoked the authorization, taking issue with the migrants being handcuffed (which is typical across administrations) and transported using military aircraft (which is not typical).

“Petro’s denial of these flights has jeopardized the National Security and Public Safety of the United States,” Trump wrote on Truth Social on Sunday afternoon, announcing a suite of actions as reprisal.

Emergency 25% tariffs on all Colombian goods coming into the U.S. would be imposed immediately, Trump wrote; they would go up to 50% after one week. The president also announced financial sanctions against the country, while indicating that all Colombian government officials (and the government’s “Allies and Supporters”) would be banned from traveling to the U.S. and see any current visas revoked.

Petro responded by uncorking a nearly 700-word post on X. “You can try to carry out a coup with your economic strength and your arrogance, like they did with [former Chilean President Salvador] Allende,” the Colombian leader wrote. “But I will die in my law. I resisted torture and I resist you.”

“You don’t like our freedom, fine,” he continued. “I don’t shake hands with white enslavers.” He announced plans to impose retaliatory 50% tariffs on all American good entering Colombia.

But his resistance didn’t last long. By Sunday night, six hours after Petro’s post, White House press secretary Karoline Leavitt announced in a statement that Colombia had relented.

“The Government of Colombia has agreed to all of President Trump’s terms,” Leavitt said, “including the unrestricted acceptance of all illegal aliens from Colombia returned from the United States, including on U.S. military aircraft, without limitation or delay.”

As a result, she added, the emergency tariffs would be “held in reserve, and not signed, unless Colombia fails to honor this agreement.” The visa sanctions would remain in effect “until the first planeload of Colombian deportees is successfully returned.”

Colombia’s foreign ministry confirmed the reversal, announcing that the “impasse” with the U.S. had been “overcome” and that Petrov’s own presidential plane would be dispatched to facilitate the arrival of the Colombians who were going to arrive on Sunday morning.

The brief Colombian-American trade war was over.

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The whole spat was a textbook example of the sort of shows of force that Trump delights in threatening, against adversaries and (in the case of Colombia) allies alike.

As long as Trump makes the more aggressive threat — and as long as the country on the other side of the dispute buys that he’ll move forward with it — he believes that he can wield the upper hand in any spat. In this early test, that theory of the case paid off.

It’s a strategy reminiscent of one employed by Richard Nixon, as his chief of staff H.R. “Bob” Haldeman recalled Nixon explaining to him when they were in the White House:

I call it the Madman Theory, Bob. I want the North Vietnamese to believe I've reached the point where I might do anything to stop the war. We’ll just slip the word to them that, “For God’s sake, you know Nixon is obsessed about communism. We can’t restrain him when he’s angry—and he has his hand on the nuclear button” and Ho Chi Minh himself will be in Paris in two days begging for peace.^”

Switch out “obsessed about communism” for “obsessed about immigration,” and “hand on the nuclear button” for “hand on the tariff button,” and you’ve arrived at the Trump Theory, threatening aggressive trade moves until other countries bend to his demands.

Trump practiced this strategy — to mixed success — in his first term as well; in a little-noticed quote during an interview with the Wall Street Journal editorial board during the 2024 campaign, he articulated it quite explicitly.

Asked by editorial page editor Paul Gigot how he would persuade Chinese President Xi Jinping “to stand down from a blockade of Taiwan,” Trump responded:

“I would say: If you go into Taiwan, I’m sorry to do this, I’m going to tax you”—meaning impose tariffs—“at 150% to 200%.” He might even shut down trade altogether.

Mr. Gigot: “Would you use military force against a blockade on Taiwan?”

Mr. Trump: “I wouldn’t have to, because he respects me and he knows I’m f— crazy.”

“He knows I’m f— crazy.”

Trump and his allies are already crowing about the strategy’s success. “Today’s events make clear to the world that America is respected again,” Leavitt said in her Sunday statement. (Or Trump, might add, feared again. “Real power is — I don’t even want to use the word — fear,” the president once told Bob Woodward, who knows from Madman Theorizing presidents.)

“THE USA HAS A LOT OF WINNING TO DO!” Trump agreed in a Truth Social post.

But it’s a dangerous strategy, even when one is discussing trade — not nuclear — war. Colombia buckled after a few hours; some countries may call Trump’s bluff, requiring him to actually carry through on his threats, which he didn’t have to do this time. (The Madman Theory doesn’t work if no one believes you’ll carry through.)

From there, how painful such a confrontation will be for the U.S. depends on the country. In this case, the U.S. is Colombia’s top trading partner: 25% of its exports go to the U.S. and 26% of its imports come from here, according to the Observatory of Economic Complexity. By comparison, only 0.99% of American exports go to Colombia and 0.5% of our imports come from the country, giving the U.S. leverage

Still, economists would retort that there are no winners in trade wars: actual (not threatened) economic standoffs generally end in financial losses for both sides. 20% of U.S. coffee imports come from Colombia, for instance, and more than two-thirds of its flowers; prices for both would have been poised to increase if tariffs had been imposed. Conversely, the U.S. exports a lot of corn to Colombia, meaning a trade war would have been damaging to American corn-growers.

Trump aide Katie Miller, a staffer on Elon Musk’s government efficiency initiative and the wife of Stephen Miller, the architect of Trump’s immigration agenda, suggested in a post on X that increased prices would be worth it over the deportation standoff. “CHARGE ME MORE FOR FLOWERS & COFFEE,” she wrote. “Thank you.”

“I would gladly pay $100 for eggs if it means I never have to see another third world immigrant in my country ever again,” Logan Hall, a staffer at The Blaze, a conservative news outlet, said in another post.

That’s the view from Trump’s allies. But if a real trade war were to arrive, and Trump was forced to carry through with his “madman” threats, it’s less likely that the American public — which elected him largely with inflation in mind — would be quite as willing to forgive increasing prices.