Last week, President Trump announced in a cryptic tweet that he was canceling major sanctions against North Korea. This led to several hours of confusion, because the Treasury Department had just announced sanctions against two Chinese shipping companies that were accused of facilitating trade with North Korea. Canceling sanctions the day after they were announced seemed like an unprecedented step. After several hours of confusion, the administration announced that Trump had not been referring to those sanctions — but instead had canceled new, as-yet unannounced North Korea sanctions that were in the pipeline.

Today, Bloomberg News reports that this explanation may have been false. Bloomberg reporters say they have been told by five unnamed sources familiar with the matter that there were no new North Korea sanctions planned and that Trump was indeed referring to the sanctions against the two Chinese shipping companies doing business with North Korea. He was eventually persuaded to change his mind, however. According to Bloomberg, the purported explanation was no more than a “cover story” intended to conceal the erratic policy process in the White House and Trump’s eventual change of mind.

In a forthcoming article in the journal International Security, Abraham Newman and I discuss how the United States has used its sanctioning power to build an extensive system of international financial control that has greatly extended the reach of U.S. power. However, recent policy steps by the Trump administration, including overreach in some areas (the threat of sanctions against close allies) and unpredictable decision-making in others (the willingness of the administration to turn sanctions into a bargaining chip in trade diplomacy) is contributing to the undermining of U.S. power. Bloomberg’s reporting is likely to add to a general impression of disarray in White House geopolitical decision-making.

U.S. power to impose sanctions has limits

As Newman and I discuss in our research, the United States has expanded its use of sanctions in the recent past. It has been able to apply new kinds of power, leveraging the central role that the dollar and financial messaging systems such as SWIFT play in the global financial architecture. The United States has been able to rely on a sophisticated administrative apparatus, centered in the Treasury Department’s Office of Foreign Assets Control (OFAC), to administer sanctions policy. However, this power has its limits. It works best when other countries — especially U.S. allies — respect it and go along with it. It also relies on the great deference that the U.S. legal system pays to the administration’s decisions about sanctions. When the administration says sanctions are in the security interests of the United States, American courts are likely to heed it.

These limits are becoming increasingly clear as the Trump administration tests them. On the one hand, the administration is increasingly unwilling to listen to its allies about sanctions policy. It effectively forced SWIFT — a Belgium-based consortium — to adhere to the U.S. position on Iran, despite the strong opposition of European states. It is also changing its approach to Cuba sanctions in ways that may — if it continues on the current path — have massive repercussions for European firms. This is leading to increasingly organized opposition from America’s European allies, as well as traditional rivals and adversaries such as China and Russia.

The Trump administration is also seeing increasing challenges to its sanctions decisions in U.S. courts. The energy giant ExxonMobil is suing the Treasury Department over a sanctions decision punishing it for its dealings with the Russian oil company Rosneft, while the Russian oligarch Oleg Deripaska announced a lawsuit over sanctions this month. Finally, the OFAC is also seeing significant staff losses as personnel defect to the private sector.

Administration inconsistency is undermining its approach to sanctions

Trump’s apparent turnabout is only the most recent example of U.S. inconsistency on sanctions. Last year, the president watered down sanctions against Chinese tech company ZTE, apparently as a bargaining chip in trade negotiations. Adam Segal of the Council on Foreign Relations described this as a “flabbergasting” decision. Trump’s ambassador to Russia was willing to share a platform with a sanctioned Russian oligarch. White House press secretary Sarah Sanders’s reasoned defense of last week’s U-turn was that “President Trump likes Chairman Kim and he doesn’t think these sanctions will be necessary.”

This inconsistency is damaging Washington’s ability to get U.S. allies to respect its sanctions and related policies overseas. European diplomats say in private that one of the reasons European states have not signed onto the effective U.S. embargo against telecommunications equipment made by China’s Huawei Technologies is that they do not know whether the administration will maintain it. They fear that if they change their policies and laws in response to U.S. pressure, Trump may just decide on the spur of the moment to change U.S. policy on Huawei, leaving Europe out on a limb.

It is also probably damaging morale among the administration employees charged with making sanctions determinations. The OFAC relies on a esprit de corps to maintain skilled lawyers, who could be making several times as much money in the private sector. It is improbable that OFAC officials are enthused by Bloomberg’s reporting of a reversal, re-reversal and coverup.

Finally, it is likely that some officials and administration lawyers are worried that the apparent lack of consistency could damage U.S. credibility in court. In general, courts defer to the administration when it cites the U.S. national interest. However, as in other areas of the law, it is possible that news coverage of apparently inconsistent and erratic decision processes, as well as possible coverups, may lead judges to be more skeptical of administration claims than in the past. It is still very unlikely that judges will overturn the very long established practices of deference, or even modify them significantly, but it is less unlikely than it used to be.