The Washington PostDemocracy Dies in Darkness

Trump’s meager haul from economic coercion

Why has Trump been unable to strike better deals?

President Trump and Chinese Vice Premier Liu He shake hands after signing the U.S.-China “phase one” trade agreement during a ceremony in Washington on Jan. 15. (Zach Gibson/Bloomberg News)

The hard-working staff here at Spoiler Alerts argued last week that President Trump’s trade deals are less than meets the eye. My Washington Post colleague Jackson Diehl noted Sunday that the same could be said of Trump’s “maximum pressure” campaigns against North Korea, Iran and Venezuela.

To be sure, the ratcheting up of economic sanctions against those troika of tyrannies has increased the economic pain they have felt. What it has not done is generate anything in the way of tangible concessions. Diehl concludes: “Trump’s biggest miscalculation was that economic weapons were enough to strong-arm the likes of [Kim Jong Un, Ali Khamenei and Nicolás Maduro]. He supposed that prosperity is their priority; it’s not. He waxed lyrical about the beach developments that North Korea could have. But these dictators don’t care about glitzy resorts. Their only interests are their own survival and that of their extreme ideologies.”

The lack of concessions from adversaries should not be too surprising. When states expect frequent conflict in the future, backing down in the present is a bad bargaining move. The only thing that makes the Trump administration different has been its refusal to recognize the bargaining dynamics at play. Maybe this will lead to the collapse of Kim, Maduro or the mullahs in Iran, but that sure doesn’t seem likely anytime soon — as Diehl notes, Maduro seems more in control now than a year ago. As for China, the “phase one” trade deal was not significant enough to affect soybean prices.

Still, there could be more at play here. Tyler Cowen is a very smart social scientist, and his Bloomberg column last week argued that the phase one trade deal with China was a diplomatic success:

The U.S. has established its seriousness as a counterweight to China, something lacking since it largely overlooked China’s various territorial encroachments in the 2010s. Whether in economics or foreign policy, China now can expect the U.S. to push back — a very different calculus. At a time when there is tension in North Korea, Hong Kong, Taiwan and the South China Sea, that is potentially a significant gain.
President Donald Trump’s tariffs did hurt U.S. consumers, and while that is indeed an economic cost of the deal, it is also a credibility benefit. It shows that the U.S. is in fact willing to incur some pain to oppose China, contrary to the common Chinese view that Americans are “soft.” U.S. credibility has also been improved among its allies and some neutral nations.

In theory, Cowen could be correct. One unobserved utility from economic statecraft is that sanctions can deter as well as compel. If the United States imposes punishing sanctions on other countries, it could act as a deterrent against other possible actors in the world. Furthermore, the idea of sending a costly signal to make clear that one is not bluffing is well-trodden territory in the statecraft literature. Indeed, go read Elizabeth Rosenberg and Jordan Tama’s latest Center for a New American Security white paper for more on how sanctions could be refined to be better at compellence, deterrence and signaling. And there are some observers who think Trump got a good deal.

The problem, however, is that upon closer scrutiny, I don’t think Cowen’s argument really fits the facts.

On the empirical side, my memory of the pre-Trump years is different from Cowen’s. I distinctly recall the Obama administration not overlooking China’s territorial encroachments, at least with respect to the East China Sea. Indeed, the Obama administration made it clear that it viewed the Senkaku Islands as being covered under Article V of the bilateral security treaty with Japan. It didn’t need to impose costly sanctions to add credibility to its signal, either, because the announcement itself was viewed as credible. It did not take similar action in the South China Sea, partially because sovereignty in that area remains more hotly contested.

Furthermore, I am baffled by the notion that Trump has established credibility in any international bargaining situation. There are too many instances of the 45th president loudly threatening action without taking it to be viewed as credible. As one Mexican diplomat put it, “He has shown us that what’s black at 9 a.m. can be gray at 3 p.m. and white at 7 p.m.” Trump lacks impulse control, prefers instinctive decision-making and enjoys tactical surprises. This makes him the perfect example of an actor who pursues what game theorists would describe as a randomized strategy.

Cowen might be correct that U.S. credibility improved among allies and neutrals, but not in the way he thinks. As my Post colleagues Anne Gearan and John Hudson note, Trump has established the reputation of someone willing to impose sanctions on allies as well as adversaries:

When Iraqi leaders this month said they wanted U.S. troops to leave their country, the president said he would impose “very big sanctions” on Baghdad in response.
And after tensions with Iran recently escalated to the point of potential war, his administration privately threatened large automobile tariffs on European countries if they didn’t call out Tehran for alleged violations of the 2015 nuclear deal that Trump has sought to dismantle.
Trump’s maximalist approach to diplomacy has become a hallmark of his administration’s foreign policy, one that has scored him some short-term victories, been derided as extortion by his detractors and played a central role in an impeachment fight over his actions toward Ukraine that will play out on the floor of the Senate this week.
Although the president has been inconsistent in how he has carried out his worldview, he has made clear that he has no plans to back away from his strong-arm tactics even as they have increasingly antagonized American friends and foes alike, leaving the United States potentially more isolated on the world stage.

What is striking is not that Trump is imposing sanctions on allies — it is the meager returns he has garnered from sanctions that should have yielded more. His renegotiated deals with South Korea on trade and security are nothingburgers. The U.S.-Mexico-Canada Agreement did not produce an appreciably better bargain than NAFTA, and in terms of trade liberalization, might have been worse. He has gotten nothing from NATO allies that was not in the works when Barack Obama was president.

Four months ago, I wrote, “The administration’s use of economic diplomacy to secure economic concessions has achieved surprisingly little, and there is no reason to expect a better record in the future.” Nothing since then has caused me to change my mind.