This is a good take, but I think I can answer your question about the midterms. This is timed specifically for them. The drop we're seeing in markets right now isn't a pricing in of the tariffs, per se (at least, not yet), it's a pricing in of policy uncertainty that is going to lead to a near-term drop in investment.

However, because they are doing it so early, they will have time to recalibrate and bake in exemptions until the market / inflation is happy. Up to and including backing off of the policy entirely, if that ends up being necessary. As a political strategy, it is perfectly timed to allow Trump to "save the economy" from his own policies. This is true imo independently of what you may think about the policy as policy.

When it comes to the policy as such, recipirocal tariffs, conceptually, are designed to incentivize the overall global reduction in tariffs. So, as a headline, implementing "reciprocal tariffs" is actually favorable to free trade. However, there are some important details that they have fucked up, such as identifying tariffs with trade deficits in general, and in particular identifying them with trade deficits in goods only. That is really the component of the policy that doesn't make sense, and it is important.

Most likely, they will recalibrate and/or provide a lot of exemptions, particularly as the midterms approach. As a political tactic, I think it will work out fairly well, if they respond to the feedback appropriately - that's the big question though, and that uncertainty is the most significant reason for the market drop.