Trump takes a step back from Liberation Day's steepest tariffs

April's "Liberation Day" was about President Trump trying to impose a new global trade system. Thursday's tariff orders were effectively a reset to create a somewhat more practical regime.Why it matters: Trump scrapped most of the highest levies, and the erroneous formula behind them. In the process, he settled on a framework that most major partners seem willing to grudgingly accept.The big picture: Tariffs are now, to be sure, higher than they've been in a century or more. That's already starting to show up in inflation data, and economists expect to see more in months to come.But for all the panic over the steep rates Trump proposed in April, the more broad 10%-15% he's now imposed is closer to a cost of doing business than a crippling barrier.Driving the news: The government published a list of dozens of countries Thursday night with the tariff rates that will be charged against their exports.Bloomberg cited a senior administration official as saying countries were roughly divided into three groups: 10% for those with a trade surplus, around 15% for those with a deal or a modest deficit and higher for those with no deal and larger deficits.Many nations got a substantial break from their April levels. A few countries saw rates rise, like Switzerland, as well as African nations like Cameroon, Chad and the Democratic Republic of the Congo.Any countries not on the list will get the baseline rate instead.The intrigue: In a separate order, Trump raised duties on Canada to 35% from 25% — though goods covered by the existing USMCA trade agreement remain exempt, as they were before.The Canadian relationship has been fraught with tension, a stark contrast to Mexico, which on Thursday got a 90-day extension to make a better deal.Of note: Trump's orders came just hours after a federal appellate court heard arguments in a case considering whether he even has the legal authority to impose such sweeping tariffs.The judges hearing that case questioned how the administration could classify trade deficits that have lasted for years, or even decades, as economic emergencies suddenly requiring tariffs.There's no timeframe for a ruling, which is widely expected to end up at the Supreme Court either way.What to watch: How companies and investors respond to the news.Markets have mostly accepted the tariff regime as it stands now, though businesses and consumers are contending with still-developing economic impacts. International financial reactions were mostly calm overnight."But we suspect that the true costs of America's isolationist turn have yet to make themselves felt, and expect renewed softness in the dollar—and in financial markets more broadly—as domestic demand falls in the months ahead," Corpay chief market strategist Karl Schamotta wrote Thursday night. The bottom line: After months of jokes about the "TACO trade" (Trump Always Chickens Out), the new orders seem meant to last.The world has to adjust itself now to an environment where exporting to the U.S. will carry a substantial cost.

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