The torrent of far-out policy moves that Donald Trump has announced during the first month of his second presidency has left pundits struggling to find method to the madness.
Some say it is all a negotiating tactic: Trump starts by staking out an extreme position, so that he later has space to exchange “concessions” with the other party without giving up anything valuable. They point to Trump’s 1987 book, “The Art of the Deal,” which encourages readers to “do things that are bold or controversial” (though there is no guarantee Trump has even read the ghostwritten work).
This interpretation aligns with the common characterization of Trump as a “transactional” leader — one who makes deals that produce short-term benefits, without regard for longer-term considerations related to credibility, ethics, democracy or the rule of law. There’s just one problem: He has demonstrated far more reckless bluster and hasty reversals than strategic thinking.
This is certainly the case with tariffs — a tool that Trump views as a foolproof means of compelling other countries to bow to his will. On Feb. 24, he confirmed that 25 percent tariffs on imports from Canada and Mexico would be “going forward on time, on schedule,” on March 4. Trump announced the tariffs soon after his inauguration, on Feb. 1, saying they would go into effect three days later. By the time Feb. 4 had arrived, however, he had postponed them for 30 days. So, will March 4 be the day of reckoning, with Canada or Mexico making major policy concessions or else facing the wrath of “Tariff Man”? Not very likely.
It is not just that the tariffs would violate the US-Mexico-Canada Agreement, which his first administration negotiated. This extreme step would be very damaging, for the US as well as the targeted economies. While Trump’s supporters still may not recognize this, Canada and Mexico certainly do.
Consider the auto industry, which is highly integrated across North America. In the short run, corporate strategies and investments in production facilities would be radically disrupted. In the long run, US auto companies would face significant efficiency losses — for example, because they could no longer source labor-intensive components cheaply from Mexico — which would undermine their global competitiveness.
Moreover, the concessions Trump asks from Canada and Mexico are not really in their power to deliver. For starters, he demands that they halt the flow of fentanyl into the US. But most of the fentanyl is brought in by US citizens, rather than migrants crossing the Mexican border, and very little comes from Canada.
Trump also insists that Canada and Mexico eliminate their bilateral trade surpluses with the US. But bilateral deficits are merely components of the overall US balance of trade, which is determined macroeconomically (national savings minus investment). Any reduction in a country’s exports to the US will result in a corresponding decline in US exports to the rest of the world, owing to factors like declining foreign income, US dollar appreciation or retaliatory tariffs. (All three forces came into play after the introduction of the 1930 Smoot-Hawley Tariff Act.)
This probably explains why Trump pretended that the fig-leaf concessions made before the Feb. 4 deadline — Canada said it would appoint a fentanyl czar and Mexico said it would move some troops to the border — were meaningful enough to warrant the tariffs’ postponement, even though they will have little impact. And it suggests that Trump will do the same next week.
In fact, we have now arrived at the non-method to Trump’s madness. First, he declares war, delighting his supporters, even though these declarations — such as his designs on Greenland, Panama or Canada — are so outrageous that they initially seem like a joke. He sticks with them, requiring a radical adjustment in expectations as the initial shock begins to wear off. But when the intrinsic unrealism becomes apparent after all, he kicks the can down the road and eventually declares victory, despite few real gains.
We have seen this before. During Trump’s first term, he insisted that the North American Free Trade Agreement (“The worst trade deal ever made”) be scrapped, and replaced with the USMCA (“The largest, fairest, most balanced trade agreement ever achieved”). But the differences between the two agreements were minor.
Trump 1.0 also included the use of tariffs to compel China to agree to an “historic trade deal,” dubbed "phase one," under which China committed to purchase $200 billion of additional US exports by the end of 2021. But those purchases never materialized.
And it is not just trade: Trump threatened in 2017 to “rain down fire and fury” on North Korea if it did not abandon its nuclear weapons program, and then acted like his 2018 meeting with North Korean dictator Kim Jong-un amounted to a major victory. In reality, the meeting was a US concession that North Korea’s leadership had long desired — and Kim went on to complete the development of long-range missiles capable of carrying nuclear warheads.
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 buildup and the resulting climactic “transaction” got a lot of public attention, but the ultimate failure to affect the course of events did not.
As Trump touts his nonachievements, the costs to the US — including damage to the international trading system, as well as to the US government’s credibility and America’s soft power and global leadership — pile up, to say nothing of the potentially catastrophic costs of strategic failures like the incipient rupture with Europe.
It is not that Trump has no real “victories.” He can destroy USAID, for example, because the domestic political constituency for international development assistance is small and weak. But the millions of people around the world who will suffer as a result will know whom to blame. Here, too, Trump’s success will cause outsize harm to America. This is not a strategy.
Jeffrey Frankel
Jeffrey Frankel is a professor of capital formation and growth at Harvard University. The views expressed here are the writer’s own. — Ed.
(Project Syndicate)
