Guest Contribution: “Trump’s far out negotiating positions”

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version, written in advance of the March 4 tariffs, was published by Project Syndicate and the Korea Herald.


March 6, 2025 — I didn’t think Trump would do it on March 4.  I thought even he would come to realize the harm that his 25 % tariffs on imports from Canada and Mexico would cause for the US economy and would have to back off. That may still happen.

  1. Staking out a negotiating position?

In trade policy, as in other areas, pundits have been hard put to distill a “method to the madness” from the torrent of moves that US President Donald Trump has announced during his first six weeks in office. Typical declarations — such as his designs on Greenland, Panama, or Canada — are so far out as to seem at first like he is joking.   But he sticks with them, requiring a radical adjustment in expectations as the initial shock begins to wear off.  (The “Overton window” shifts in directions that had previously been unimagined.)

Many analysts have adopted the interpretation that Trump follows a deliberate negotiating strategy.  He is said to stake out an extreme position, not because he necessarily expects to get everything that he asks for, but rather as a negotiating tactic, a base from which he plans in the future to make concessions, in exchange for important concessions by others, thereby achieving a glorious bargain.

This is related to the more general characterization of Trump as “transactional” — a polite way of saying that he makes deals that have short-term benefits (possibly financial benefits to himself), while ignoring longer-term considerations of ethics, credibility, the rule of law, and the larger system.  Pundits often cite his ghost-written book The Art of the Deal, even though it is not certain that he ever read it, let alone wrote it.

This interpretation imputes too much strategic thinking to Trump.  I am not sure that he thinks ahead at all.  The pattern that generally fits better than a thought-out negotiating strategy: He likes to declare war, cheered by his supporters; and he eventually declares victory even though the US has gained little.

 

  1. 25 % tariffs against Canada and Mexico

Trump initially announced the 25% tariffs on the neighbors soon after his inauguration, in violation of his earlier US-Mexico-Canada Agreement, not to m. This was not a move that he had campaigned on, having emphasized rather China and other trading partners as the primary targets for tariff threats. On February 4, he suddenly postponed the tariffs for 30 days. At the same time, a further tariff of 10% against Chinese imports, an “opening salvo,” did go into effect, as did retaliation from Beijing.  On March 4, the tariffs against Canada and Mexico went into effect, as well as another 10% against China. Today, as I write, the White House is once again talking about exemptions, suspensions, and postponements.

If the on-again off-again tariffs are kept on for long, they will seriously damage, not just Canada and Mexico, but the US economy as well.

The havoc will be critical in the case of the highly integrated North American auto industry, unless Trump changes his mind and offers exemptions.  In the short run, corporate plans and investments in production facilities that had been made in reliance on the existing trade rules will be radically disrupted.  In the long run, US auto companies will find it more difficult to compete with East Asian or European firms in the global marketplace if they lose the efficiency gains from sourcing particular steps in the production process, e.g., labor-intensive components made in Mexico.

Trump and his followers may have been unaware of just how harmful would be the disruptions that he proposes.  But the economic destruction has become clearer, now that the tariffs have arrived and some in the business sector belatedly find their missing voices.
Meanwhile, it is not clear that he is asking anything of Canada and Mexico that is their power to deliver.  Sometimes he asks the neighbors to block the flow of fentanyl; but very little in fact comes to the US across the northern border.  At other times, he demands that the trading partners eliminate their bilateral trade surpluses vis-a-vis the US.  But the individual bilateral trade imbalances compose the US’s overall trade deficit, which is determined macroeconomically, by national saving minus investment.  If countries export less to the US, whether the result of the threatened tariffs or as the result of unspecified concessions of their own, US exports to the rest of the world will also fall correspondingly. The fall in US exports could come via several channels: a decline in foreign income, an appreciation of the dollar against other currencies, or – most obviously – foreign tariff retaliation. All three channels operated after the disastrous Smoot-Hawley tariff of 1930.

On February 4, when Trump postponed the 25% tariffs which he had affirmed only three days earlier, he cited concessions from Ottawa and Mexico City that were not likely to have the desired effects.  Canada, for example, said it would appoint a fentanyl czar. Evidently what it has done is not enough.  But it is hard to say what more it could do. Very little fentanyl was coming into the US over its northern border in the first place.  Indeed, each of America’s three largest trading partners is genuinely puzzled over what exactly the US President wants them to do.

  1. Three precedents from the first term

Trump often follows a pattern: he makes outlandish accusations and threats and then eventually backs down, claiming victory based on little.  In December 2019, he induced Mexico and Canada to scrap NAFTA (which he had called a “nightmare” & “the worst trade deal ever made”) and to replace it with the USMCA. (“The largest, fairest, most balanced trade agreement ever achieved; there has never been anything like it.”) But the differences between the old agreement and the new turned out to be relatively minor, and today Trump is ripping it up.

Another precedent from his first term was the tough and prolonged confrontation with China, including a series of tariff increases. Trump was “looking for a complete deal.” In January 2020 he duly trumpeted the outcome, a signed “Phase One” agreement, which he called “an historic trade deal.”  In it, the Chinese agreed to buy another $200 billion of US goods. They never did.

A third example, this time from the security realm.  After having threatened in 2017 to “rain down fire and fury like the world has never seen” on North Korea if Kim Jong Un did not abandon his bid for nuclear weapons, the President met with him in Singapore in June 2018. As reported by Katie Stallard, “Trump treated the summit as a victory in itself, reveling in the media attention and acting as though he had pulled off something truly remarkable by persuading Kim to meet, when in fact North Korean leaders had long sought the prestige such an event would bring.” Subsequently, Kim went ahead and completed his nuclear missile program, putting the final nail in the coffin of a multi-decade US effort to stop it.  Now he has approximately 50 weapons.

In all three cases — the summit with North Korea in 2018, the USMCA in 2019, and Phase One with China in 2020 — the original confrontational build-up and the resulting climactic “transaction” got a lot of public attention, but the ultimate failure to achieve American goals did not.

  1. Where’s the harm?

What will become of the trade war with Canada and Mexico? Eventually the White House will declare victory, despite having accomplished little.

This is not to say that the sturm und drang is harmless kabuki, or “sound and fury, signifying nothing.”  The Trump approach has already done a lot of harm and will continue to do so.  For one thing, there are some policy areas where he can prevail.  He can get away with destroying USAID, for example, because its domestic political constituency is small and weak.

Meanwhile, even when Trump eventually backs down, the harm remains.  In the case of trade policy, we may also be left with some permanent tariffs that are economically harmful.  The penalties against China and against steel and aluminum from his first term are still in effect six years later.

More generally, we are left with long-term damage to US “soft power,” to firms’ ability to plan, to the credibility of assertions by the US government, to the trustworthiness of its promises, and to the reliability of the entire international trading system.  The whole process — vituperative denunciation of partners, threats that violate past agreements, chronic uncertainty, repeated postponements, and then hyperbolic declarations of success – undermines the once-impressive global leadership of the United States.  It is not a strategy.


This post written by Jeffrey Frankel.

8 thoughts on “Guest Contribution: “Trump’s far out negotiating positions”

  1. Macroduck

    Very good.

    I think it is a mistake to think about “the deal” when assessing the felon-in-chief’s negotiating behavior. I think we should look, instead, at what he expects to extract for himself from the deal. He wants money, reputation, celebrity, but not necessarily a hotel that is a going concern or a more prosperous country. Casinos go bankrupt? Sure, now they do, but not when Felon Resorts and Casinos did. His backer, DLJ, was left holding the bag and the felon made millions:

    https://www.nytimes.com/2016/06/12/nyregion/donald-trump-atlantic-city.html

    An Overton window is no damned good if it is framed in fiction. Making America Great is a grift. “What does the felon get?” is the only clear-eyed framing for any assessment of the felon’s behavior.

    Next:

    “…the Chinese agreed to buy another $200 billion of US goods. They never did.”

    This highlights the impossibility for every trading partner in complying with the felon-in-chief’s trade demands. Trade, in market economies, isn’t a policy executed by government. It’s the result of policy, private decisions, natural events and so forth. One government cannot give another government a particular bilateral trade outcome. So, yes, absolutely, the felon-in-chief is demanding something other than what he actually wants.

    What does he actually want? One possibility, based on his observable behavior, is grovelling. Starmer’s “bid deal” invitation to the felon from King Charles, relabeling NAFTA to flatter himself, fauning cabinet official – these are the rapist-in-chief’s actual goals. Along with money and a shield from prosecution, of course.

    Reply
  2. H Brown

    ” Indeed, each of America’s three largest trading partners is genuinely puzzled over what exactly the US President wants them to do.”

    Prime Minister Justin Trudeau was very clear about what the US President wants us to do: surrender our sovereignty to him. The reality would not be statehood, though, but more likely a nebulous Purrto Rico-like status with the added benefit of being ruled by an all-powerful administrator-for-life in the person of DJT.

    I believe he has a backup plan, which is to destroy our aluminum, forest product and potash industries and replace the lost US imports with Russian and Belrussian supply, with Trump getting a percentage.

    Reply
  3. Not Trampis

    okay can you yanks try to explain Trump on tariffs. first they are on and then they are off then some are on and some are off.

    I know he is an idiot BUT even idiots are usually consistent

    Reply
    1. Macroduck

      A foolish consistency is the hobgoblin…no, wait…that can’t be it.

      Inconsistency is part of the grift.

      Reply
    2. Ivan

      He is constantly inconsistent. That gives him the most attention (ratings). He is not a real President (one that worry about policy and governing), he just plays one on TV. So his concern is that people tune in and pay attention.

      Reply
  4. joseph

    Turns out the disagreements in private are much more extreme than just tariffs, according to reports on phone calls between US and Canadian officials.

    Trump told Trudeau that he did not believe that the treaty that demarcates the border between the two countries was valid and that he wants to revise the boundary. Trump was referring to the 1908 boundary treaty. Apparently signed treaties are like the US Constitution — whatever Trump wants it to be.

    Trump also wants to rip up the agreements on the sharing of Lakes Superior, Michigan, Huron, Erie and Ontario.

    Trump wants to eject Canada from the Five Eyes intelligence sharing group.

    Commerce Secretary told his Canadian finance counterpart that “Trump had come to realize that the relationship between the United States and Canada was governed by a slew of agreements and treaties that were easy to abandon.”

    Well, that’s Trump — reneging on every agreement he has ever made in his career in business or politics. Zelensky was right to be wary.

    So there’s a lot more going on here than just a few tariffs. It’s much, much worse.
    https://www.nytimes.com/2025/03/07/world/canada/trump-trudeau-canada-51st-state.html

    Reply
  5. joseph

    As I said before, if Trump believes that agreements can just be ripped up, Canada should forget about cows and pull the trigger where it will really hurt — intellectual property. Software, pharmaceuticals, movies, music and lots of other stuff. If Meta, Amazon, Microsoft, Google and Disney are paying millions in bribes to support Trump, then they are legitimate targets. A key portion of Trump’s USMCA is intellectual property. If Trump says all the tariff agreements are out, then so should the IP agreements.

    There is word that there is serious discussion in the Canadian Cabinet about doing exactly this.

    Reply

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