So, that happened.

Incredibly enough, the president completely backed off of reciprocal tariffs yesterday. Yes, there are a bunch of caveats--it's just a 90-day pause! It's only for nations that don't retaliate! Etc., etc. The whole thing was so confusing that even the White House couldn't confirm for a few hours what the actual current tariff rate on Canada and Mexico now is. (Answer: 25% for non-compliant goods.) 

In one sense, this played out exactly as many Wall Street pros had been expecting. I quoted them the other day--Ed Yardeni, Steve Auth, Stephen Stanley--they all expected some sort of "graceful pivot," to use Stanley's term, as markets worsened. We got more than that yesterday. Stocks soared when the president suddenly posted his change of plans on Truth Social shortly after 1 p.m ET. The Dow soared nearly 3000 points. The Nasdaq soared 12%, for its best day since 2001. 

What now? Are we still trying to dramatically remake the U.S. economy? Or are we just playing at the margins and giving the president leverage to deploy in a variety of ways, economic and otherwise. My guess is they're trying to do some of everything, which may not actually add up to enough for any kind of major overhaul, depending on how exactly the situation with China now plays out. 

In a sense, this was always just about China. Which is why everyone was scratching their heads when the president went after Mexico and Canada first. "It's as if he's tired of lashing out at China," Derek Scissors of AEI told us in late January. "It seems like the president has lost his trade deficit target." 

Perhaps Scissors struck a nerve. After all the tariff tit-for-tat of the past two months, we have now landed in a place where most countries will be tariffed at only 10%, and China is now at a whopping 125%. If that sticks, it will singlehandedly reshape the U.S. economy. If it doesn't, then it won't. 

Just a few days ago, advisors were crowing about how the new tariffs would help deliver anywhere from $300 to $600 billion in extra revenue. Enough to cut taxes! Enough to close the deficit! Enough for you-name-it. How much will the new tariffs raise now? Let's start by seeing for how long they actually remain in place. 

Ironically, the anticipatory hit to consumer confidence has proven far worse than the actual implementation of tariffs so far. Sentiment last month was almost as bad as it was during the financial crisis. And yet we know now that the economy added 228,000 jobs last month, and the consumer price index actually declined. 

The political hit was already becoming evident, in other words. At almost the same moment that the president was composing his post yesterday to back down on tariffs, the House had to delay a vote on his signature budget bill (which will extend the expiring tax cuts) with "nowhere near the vote tally" needed to pass it. That's because centrist Republicans are resisting major cuts to Medicaid, but without major spending cuts, conservatives are refusing to support it. 

So where does that leave us? "Damage has been done to the economy and to consumer expectations," even with any further resolutions on the tariff front, wrote economist Drew Matus yesterday in sticking with his recession call. "An element of trust has been lost, and that will take time to recover." The Dow is now down nearly 1000 points again this morning, as whatever this new reality is sinks in. 

See you at 1 p.m!

Kelly

Twitter: @KellyCNBC

Instagram: @realkellyevans