Washington, DC – Last week, I went to New York to meet and talk with business people who are fans of CSIS and interested in international trade issues. While I went largely to talk, what I learned from them was more interesting, I suspect, than anything I told them.
In brief, though most of them strongly disliked President Trump as an individual—“reprehensible” was one of the kinder, non-four-letter words employed—they really liked what he was doing. Their objections were to him personally—the tweets, the bullying, the management chaos, the personal style, and so on. Their enthusiasm was for his actions and policies, many of which did not involve trade. The North Korean summit news was breaking during my trip, and there was considerable optimism that that would have a happy ending, and his announcement that the United States was pulling out of the Iran agreement was also met with approval.
The people doing the talking were largely conservative, and it was clear that much of their enthusiasm stemmed from domestic policies rolling back Obama administration initiatives or foreign policy moves that were not directly related to trade. But when trade did come up, I found the same enthusiasm, despite some worries that I will get to shortly. In some areas, China most obviously, the view was not that different from what it is in Washington—that the president was sticking it to a country that clearly deserved to be stuck and that his confrontational style, annoying though it was on a personal level, could well be the best approach to take, since previous, softer, approaches have not worked. On the North American Free Trade Agreement (NAFTA) and on steel and aluminum tariffs, people thought his tactics might work. In essence, they recognized him as a disruptive force but felt that might be just what the trading system needs.
That started me thinking; what if he’s right? And that’s a thought I’ve begun to hear more and more here in Washington as well—that perhaps normal diplomatic pathways are so ossified that a sledgehammer approach is the only way to produce meaningful change.
This is a hard pill for the swamp to swallow, and it is too soon to say whether we will have to. Only one trade negotiation has been completed in this administration—with South Korea—and that had, at best, a modest outcome for the United States. While it began with the usual bluster and bullying that are now so familiar, it ended surprisingly quietly with a conventional agreement involving market access concessions. Current signs suggest NAFTA could play out the same way—we will have a better idea by the end of this week—and there is no doubt that the Chinese will try to do the same thing, although that will be a more complicated task.
It is interesting and significant that in all these cases, as well as the steel and aluminum tariffs, nobody is standing up to the bully, which is generally regarded as the best way to deal with one. The New Yorkers thought that was pragmatism: the other countries want a deal so they can move on and get back to business. Others suggested in some cases, notably Europe, it was internal divisions that prevented a strong response. No one mentioned fear and intimidation, although that may be part of it as well.
One longtime trade veteran suggested it shows that when the United States wants to throw its weight around, it has plenty of heft to do it (not a comment on the president’s own girth). As Trump periodically points out, we are a large economy; people want to do business with us; so we do have leverage.
The advantage of this approach is that it may well produce short-term gains, particularly if the president maintains his focus on immediate market access concessions. The disadvantage is that it may also produce long-term costs, both economic—disrupted supply chains and new ones that are more expensive and make our companies less competitive; and political—weakened multilateral institutions and rules and irritated allies that will not be there for us when we need them.
Of course, going for the short-term gain is a time-honored tactic that goes back at least to the Roman Empire’s bread and circuses for the masses and remains widely popular today. After all, if the bill doesn’t come due for five or ten years, it will be somebody else who has to pay it. There are no laws holding politicians accountable once they are out for what they did while they were in (aside from criminal actions).
So, under the circumstances, it would be smart for us cynics not to ignore the little voice in the back of our minds saying, “Maybe he’s right.” Time will tell, but at this point we should not rule out the possibility, however painful that might be.