U.S. President Donald Trump is getting a crash course in the realities of a globalized economy, and he is learning some early lessons that may preclude a real “crash” in the not-too-distant future. The man who declared that trade wars are “easy to win” is discovering that such victories are less cut-and-dried and the collateral damage may prove extensive.
The most recent example of the education of Trump was evident last weekend when U.S. and Chinese negotiators announced that their two governments had reached agreement for China to buy more goods and services — including “meaningful increases in United States agriculture and energy exports” — to “substantially reduce the United States trade deficit in goods with China,” a deficit that last year reached $375 billion. The statement was brief — it included no specific deficit reduction target — and noted that Washington would send a team to China to fill in details.
U.S. Treasury Secretary Steven Mnuchin said the deal was “a framework” for economic relations, adding that the two sides had agreed on specific targets for individual sectors. For example, he anticipated “a very big increase, 35 to 45 percent increases in agriculture this year alone,” along with “$50 [billion] to $60 billion a year of energy purchases over the next three to five years,” which would constitute a doubling of energy purchases. This was enough, he noted, to put a looming trade war “on hold.”
Critics have been quick to point out that there is little new in the announcement. Vague commitments are typical of previous deals — agreements that were vehemently denounced by Trump as fatally flawed and insufficient to protect U.S. economic interests. The two sides agreed to “strengthen cooperation” on enforcement of intellectual property rights, a ritual statement that has historically had almost no result. China was expected to buy more U.S. agricultural products and energy supplies as its economy matured, so those much-touted concessions look like naturally occurring developments. Significantly, even a tripling of current purchases would not come close to reaching the $200 billion target that U.S. officials had promised to hit — much less the existing trade deficit.
What accounts for the quick U.S. retreat? Two factors likely figure heavily in the president’s thinking (although he would deny there has been any change in his approach). The first is the messy reality of international trade relations. Trade wars are not easy to win, and shrewd trade partners can quickly identify ways to exact well-focused pain on the U.S. China had reportedly slowed the import of U.S. agriculture products by stepping up inspections at Chinese ports, hitting the earnings of a key Trump constituency. Europeans have developed similarly targeted retaliatory measures in response to threatened U.S. trade sanctions.
It is more likely, however, that Trump’s desire for a successful summit with North Korean leader Kim Jong Un, and a resolution to the nuclear standoff with North Korea, is shaping his trade policy. Trump has long believed that Beijing is critical to dealing with Pyongyang, a view that has been reinforced by two recent meetings that Kim had with Chinese President Xi Jinping.
The speed of the recent China-North Korean rapprochement — after several years in the deep freeze — has some concerned that Beijing is now prepared to work with Pyongyang, rather than Washington, to shape outcomes in Northeast Asia. Hardening North Korean demands in the run-up to the summit with Trump reinforce the belief that there is new life in that old relationship. By this reasoning, the U.S. needs to take the edge off the U.S.-China trade relationship to counter the shift in Chinese thinking and get it back on the U.S. side in nuclear diplomacy.
There are some lessons for Japan in these developments. First, Trump’s bark is worse than his bite. Japanese trade negotiators must stick to principles when engaging the U.S. They should continue to defend a rules-based order rather than accommodating U.S. unilateralism. Japan should use the rules and institutions of the existing trade system to defend its national interests. It should align with like-minded governments to press the U.S. to do the same.
Second, Prime Minister Shinzo Abe should try to leverage his relationship with Trump to ascertain what Japan can do to help him realize a successful summit with North Korea and realize the goal of denuclearizing the Korean Peninsula. While the linkage of such issues has historically been anathema to U.S. presidents, it seems reasonable that Abe explore the transactional approach that the U.S. president seems to prefer. He should explain the ways that Japan’s ties to the U.S. promote its economic growth, helping to correct Trump’s long-held and now outdated beliefs about Japan.
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