Morning from Copenhagen.

Lutnick was out overnight reiterating that trade deals are now the administration’s immediate priority. At the same time, however, he noted that “Japan, South Korea, and India would take time and effort.” So where does that leave a deal with China if even Japan and India are expected to be lengthy processes?

It doesn’t sound like Lutnick believes a U.S.-China deal can be struck swiftly enough to prevent the tariffs from inflicting meaningful economic damage. Trump, on the other hand, sounded much more optimistic—stating he’d be willing to lower tariffs to 60% if talks over the weekend go well. His “this is a good time to buy” comment yesterday may even hint that a deal is already in the works.

The trade deal with the UK yesterday was underwhelming—predictably so, given the relatively balanced trade relationship between the two. It was clearly the easiest win on the board and likely serves more as a signal that the policy focus has shifted toward dialing back tariffs.

Still, the deal with the UK has virtually no impact on the average U.S. tariff on the rest of the world. China and Europe remain the critical pieces. Smaller deals won’t move the needle on global growth risks—especially as the negative spillovers from Chinese and European slowdowns ripple through the global economy.

The administration’s pivot seems driven by two key motives. First, to minimize the economic damage from tariffs before it’s too late. Second, from a fiscal perspective, lower tariffs with higher trade volumes generate more revenue than punitive tariffs with no trade at all. The initial phase of reciprocal tariffs brought a short-term improvement in the deficit, but that benefit has since stalled.

Chart 1: If You Want to Lower the Deficit, Lower Tariffs!