Talking tough
Can Trump’s bullying style deliver more trade breakthroughs?
“You set a bunch of fires ... you put them out and you call yourself a hero.”
Philip Levy, Chicago Council on Global Affairs
The Trump administration has muscled Canada into joining a revamped North American trade deal, sealed a pact with South Korea and coaxed a reluctant Japan into agreeing to one-on-one trade talks.
All in the past two weeks. To President Donald Trump and his allies, the results vindicate his drive to upend traditional trade policy and deploy import taxes - real and threatened - as a cudgel to bully concessions out of America’s trading partners.
“Without tariffs,” Trump boldly declared Monday after his team announced that Canada had followed Mexico in agreeing to a revamped North American deal, “we wouldn’t be standing here.”
Some likeminded business groups agree that Trump’s in-your-face style, a far more confrontational stance than his predecessors deployed, deserves credit.
“Aggressive unilateral action is making deals more possible,” said Michael Stumo, CEO of the Coalition for a Prosperous America, which supports a combative U.S. trade policy.
Negotiating without a credible threat of trade sanctions, Stumo argued, “leaves no incentive for other countries to agree to anything new.”
Critics, though, contend that Trump’s apparent breakthroughs appear much more impressive than they actually are. What’s more, they say, the backlash the administration could face in the future from formerly friendly trade partners could diminish whatever gains have been achieved.
“You set a bunch of fires ... you put them out and you call yourself a hero,” said Philip Levy, senior fellow at the Chicago Council on Global Affairs and a White House economist under President George W. Bush.
The critics say the recent trade deals have produced few concrete gains and offer scant reason for optimism about the administration’s riskiest gamble of all: The trade war it’s ignited with China, the world’s second-biggest economy after the United States.
Trump entered the office vowing to reduce America’s gaping trade deficit - $553 billion last year - with the rest of the world by tearing up trade agreements and confronting abusive practices by China and other countries. In March, he began imposing taxes on steel and aluminum imports. Four months later, he threatened to target foreign autos and auto parts - imports that amounted to $340 billion last year.
Trump justified the moves by arguing that the imports posed a threat to U.S. national security. Many trade analysts dismissed that rationale as preposterous. Most of the targeted imports, after all, come from U.S. allies - Canada, the European Union and Japan.
Whatever the legitimacy of his tariffs, by imposing and threatening them on national security grounds, Trump created leverage for himself. He upped the ante by threatening to abandon a regional pact with Canada and Mexico - and thereby imperil supply chains that crisscross borders - unless he could get what he considered an acceptable rewrite of the North American Free Trade Agreement.
America’s trading partners began to buckle under the pressure.
To avoid the steel and aluminum tariffs, South Korea agreed to a rewrite of a 2012 trade deal with the United States. Under the revamped version, Seoul submitted to quotas on its steel and aluminum exports to the United States and modestly opened South Korea’s auto market to U.S. automakers, among other things.
Japan managed to halt the threat of U.S. auto tariffs by reluctantly agreeing last month to bilateral trade talks with the United States. Tokyo had resisted Trump’s entreaties, preferring a broader trade pact, like the 12-country Trans-pacific Partnership negotiated by the Obama administration. But Trump had abandoned the TPP on his third day in office.