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Deal-maker Trump Can’t Deal

Sep 11 , 2017
  • Jeffrey Frankel

    Professor, Harvard University's Kennedy School of Government


Donald Trump has threatened new trade barriers against China while simultaneously depending on Beijing’s help to rein in North Korea’s alarming nuclear weapons program. These two aspects of U.S. policy toward China are at odds.

To state the obvious, the stakes are vastly higher in a potential U.S.-North Korean military conflict, especially when it comes to the real danger that nuclear weapons will be used, but even if they are not. But we are forced to consider the Chinese trade issues together with the Korean nuclear issues. 

It is probably true that heightened Chinese pressure on Pyongyang up to and including a cut-off of oil supplies, would be the best hope of getting Kim Jung-un to agree to suspend his nuclear program in return for certain security assurances from the U.S. (The time when the U.S. might have prevented North Korea from getting a nuclear capability altogether is past.)

Perhaps Trump imagines that he can use trade threats against China as “bargaining chips” to secure its help in dealing with its troublesome ally. If so, he is on the wrong track. The consequences of this mistake could be disastrous.

Skills of a deal-maker

The usual defense of Trump’s unprecedented approach to governing is that he is “transactional,” a deal-maker who presumably has bargaining skills because he was a businessman. Many speak of this transactional approach as if it is a relevant alternative to the traditional assumption that a president should have some regard for rules and principles, and some respect for international alliances and institutions that are favorable to the long-run interest of the U.S. They speak of it as a matter of short-term tactics versus long-term strategy. But there is a serious question whether Trump can pull off even short-term tactical successes.

Despite his career in the private sector, the President acts as if he were unfamiliar with some of the most elementary requirements for successful negotiation. One principle of deal-making is to consider the game also from the other player’s viewpoint and to think of outcomes that both sides will have reason to view as favorable compared to the relevant alternatives. Another principle is to build credibility with respect to threats and rewards, so that the other player will perceive a genuine choice of outcomes.

Erratic trade threats against China

How can the U.S. persuade China to take stronger steps?  Despite Trump’s hope that he can use trade with China as a “bargaining chip” to secure its help, erratic threats from the White House are not the way. Chinese leaders in China have already learned that they need not take Trump threats seriously. In December, before taking office, Trump challenged the One China policy.  He evidently did not think ahead or take into account that China is more willing to go to war over Taiwan than is the U.S. On February 9 he had to reverse himself.  He got nothing for his “bargaining chip” other than loss of face and a bad precedent for future bluffs.

Another example of a threat that Trump backed down on was his oft-repeated campaign promise that he would name China a currency-manipulator as soon as he took office. This policy was foolish all along. If Chinese authorities had agreed to U.S. politicians’ demands that they stop intervening in the foreign exchange market during the period 2015-16, the result would have been a more competitive yuan, not a stronger one. But regardless of whether there was any merit to the original charge, which Trump repeated as recently as April 2, 2017, he again lost face with the Chinese by suddenly reversing himself a week later. By now Chinese President Xi Jinping, like most observers, has learned to discount warnings from Trump because they bear such a very low correlation with reality.

The White House is still pursuing aggressive trade policy actions against China. The measures cover a range with respect to their merits. An attempt to block steel imports by means of a national security exemption is farcical -- flimsy on legal grounds and bad policy on economic grounds. Excluding steel imports, if successful, would raise costs for the rest of U.S. manufacturing. The same with aluminum imports. Some other measures have more merit, such as attempts to enforce intellectual property rights.  (On August 18, the White House launched a formal inquiry into whether China is stealing intellectual property.  The questionable route of retaliation under Section 301 is contemplated.)

But none of these trade initiatives would have much of a positive effect, if any, on the U.S. trade balance, real income, or employment. And, regardless of the merits, the penny-ante games the Trump Administration is playing on trade policy will not work in favor of enlisting Chinese help in dealing with their neighbor—but more likely will work against it.

What, then, is the best way to enlist China’s help?   

Credibility could have been useful

Start by considering the Korea problem from China’s viewpoint, as any deal-maker should do. It doesn’t want North Korea to have nuclear weapons. But it fears even more the prospect of a breakdown of order in its next-door neighbor, with volatile consequences, including both the possibility of waves of refugees and the possibility of intervention by U.S. troops. The U.S. and Korean governments should be prepared to promise that if China applies strong enough economic sanctions to bring the North to its knees, the ultimate outcome will be neither U.S. troops north of the 38th parallel, nor a unified Korea with nuclear weapons. The U.S. and South Korea should also be prepared to pause the deployment of THAAD (the Terminal High Altitude Area Defense system) as a short-term gesture in return for China enacting and enforcing full sanctions.

It would take credibility on the part of the U.S. president to make this strategy work – or to make any strategy work.  Trump’s credibility is extraordinarily low, because his noise to signal ratio is extraordinarily high. Foreign leaders, like most American citizens, have come to realize that his statements—whether about the past, present or future—are all but uncorrelated with reality. 

Beyond the China trade threats, consider two examples from the Korean nuclear issue.  In January, Trump tweeted, “It won’t happen!” in reference to North Korean aims to develop a nuclear weapon capable of reaching parts of the U.S. On August 11 he said that if Kim Jong-un "utters one threat in a form of an overt threat — which, by the way, he has been uttering for years, and his family has been uttering for years — … he will truly regret it. And he will regret it fast." One need not wait to find out: It is already clear that these two statements were not accurate, further reducing what little credibility he had.

It would not be surprising if China’s leaders have concluded that in the U.S. President they have finally encountered a leader whose words are even less credible than those of Kim Jong-un.

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