President Donald Trump has embarked on a dangerous, high-risk strategy that is jeopardizing U.S. trade relations around the world, and there is little reason to think he can pull it off.
His negotiating tactics so far have been painfully obvious. He sought to create an artificial pressure point by staking out dramatic positions, followed by threats — in this case, punishing tariffs on foreign steel, aluminum and other products. Then he opened a window — a temporary exemption during which he doubtless expected to easily win concessions.
But it didn’t work out that way. Europe, Canada, Mexico — all long-standing trading partners and allies — have balked at negotiating under threat. As the deadline for the exemption approached, it was the Trump administration that blinked, offering another 30 days.
“This should not happen between allies,” European Commission President Jean-Claude Juncker said in an address to the European Parliament. The E.U. is now demanding a permanent exemption from steel and aluminum tariffs before negotiating. German Chancellor Angela Merkel recently said Europe is “resolved to defend its interests within the multilateral trade framework.” That is diplomacy-speak for signaling that if Trump wants a trade war, he’ll get one.
Meanwhile, NAFTA remains unsettled, despite Trump’s demands for a final agreement by mid-May. Trump has also taken a hard line on China, with even less to show for it. Two days of talks in Beijing abruptly broke down on Friday, with no new talks scheduled. China has already virtually shut down its purchase of U.S. soybeans, a gut-punch to Minnesota farmers just as they are about to sow their spring crops. Beijing has warned the U.S. not to set preconditions on trade talks nor expect China to make major concessions on core interests. Like Europe, they consider their economy strong enough to withstand a trade war.
What this country needs to ask itself is whether it is so prepared. Certainly, Commerce Secretary Wilbur Ross seems to think so. Just before talks began, he said China had more to lose in a trade war than the U.S. Even more arrogant was the statement of top trade adviser Peter Navarro, who noted that although discussions were taking place in China, decisions would be made in Washington.
That kind of bombast may satisfy Trump’s tough-guy urges, but it’s unlikely to produce the win he seeks. The world of international trade is a delicate balance of competing interests among sovereign nations. Legitimate complaints exist about the disadvantages under which some American businesses must operate in foreign countries.
China’s lax intellectual property practices rank high on that list. But successful negotiations usually require more finesse than force. Trump’s hasty and ill-considered withdrawal from the Trans-Pacific Partnership, which could have acted as a counterweight to China, has actually reduced U.S. leverage.
If Trump truly wants to take a hard line against China, this might not be the best time to alienate Europe and other allies with tariffs or quotas that could wind up boomeranging against American businesses and consumers. China is the world’s second-largest economy and rising fast. If he wants to fight that trade war, he’ll need friends.
“None of us would defend China’s trading practices,” said Perry Aasness, executive director of the Minnesota Agri-Growth Council. “We’d all like to see some changes. But there is a great deal of risk in the way this is being pursued. The consequences for trade could be very dramatic.”