Here a Deal, There a Deal, Everywhere a Deal?

After taking a brief vacation from tariffs, it is time to return to them and take a look at the new cottage industry of pop-up negotiations. Although they have not all been identified, we seem to be up to about 100 countries that have expressed interest in negotiating to get rid of the tariffs that will be applied to them on July 8—unless there is another postponement, which would surprise no one given the confusing way the tariffs have been rolled out. That raises obvious bandwidth questions at the Office of the United States Trade Representative, although it appears that some of the workload is being assigned to the Department of the Treasury and the Department of Commerce.

There has been an ongoing debate within other governments over whether it is better to talk early to get the best deal or to wait until later. The Trump administration has argued that the early bird gets the worm. Others have argued that if early deals fail to materialize, Trump will lose leverage, and those coming in later would be in a stronger position. If it became obvious that trade and the U.S. economy were slowing due to the tariffs that are already in place and the uncertainty Trump’s policy has created, then the administration would badly need some successes and might be more flexible in negotiating. Of course, that is only true if everyone waited. Unfortunately, some are not, and early talks are underway.

The early birds seem to be primarily Asian—India, South Korea, Japan, and Vietnam—probably because they face some of the highest tariffs and have the most at stake. The administration has suggested it is prioritizing negotiations with our 15 biggest trading partners: Mexico, Canada, China, Germany, Japan, South Korea, Taiwan, Vietnam, the United Kingdom, India, the Netherlands, Ireland, Italy, France, and Brazil. It appears that Switzerland has also made the list. This fits the pattern Trump established in his first term, where he concentrated his ire on our then-biggest trading partners—Canada, Mexico, China, Japan, South Korea, and Germany—and it also demonstrates his preference for bilateral negotiations where he believes he has the most leverage.

The European Union, which has five members on the “naughty list,” is taking its time, although some proposals may be presented this week. That process will be slow because it requires building consensus among all 27 members, which have variable trade relationships with the United States, and because it needs to make a threshold decision about its willingness to retaliate in the event of failure to reach an agreement. So far, the only official retaliation has come from China, a special case to be discussed in a separate column, and Canada on auto tariffs, but it is widely expected that if there is further retaliation, it will come from the European Union.

So, what is actually happening? Despite frequent predictions of imminent announcements of agreements, as of this writing (May the Fourth be with you), nothing has crossed the finish line. That suggests that finishing them is harder than the administration expected, and that in the short run, they will more likely be “framework” agreements rather than finished products. The difference is that the former are largely statements of principles and commitments to agree on specifics at a later date, with perhaps something meaningful thrown in, as opposed to specific, detailed commitments. These are “Potemkin” agreements with pretty facades and nothing behind them. The one thing we can be sure of, however, is that they will be labeled tremendous successes and proof of Trump’s negotiating prowess.

There are two reasons why the talks will be more difficult than expected. First, while the administration seems to expect other countries to offer concessions to the United States, either accepting them or demanding more, some countries are expecting a win-win outcome where both sides make concessions. That conflicts with Trump’s zero-sum approach, where others give, and the United States only takes. Second, it is apparent that the administration is determined not only to see tariff reductions but to seek nontariff barrier (NTB) elimination. On that, Trump himself has conveniently provided a list of NTBs:

“NON-TARIFF CHEATING:

1. Currency Manipulation
2. VATs, which act as tariffs and export subsidies
3. Dumping Below Cost
4. Export Subsidies and Other Govt. Subsidies
5. Protective Agricultural Standards (e.g., no genetically engineered corn in EU)
6. Protective Technical Standards (Japan’s bowling ball test)
7. Counterfeiting, Piracy, and IP Theft (Over $1 trillion a year)
8. Transshipping to EVADE Tariffs!!!”

The problem with many of these, particularly in agriculture, where they proliferate, is that we may think of them as protectionist, but the other country thinks of them as sound public health and safety regulations. Tariffs are numbers, and it is easier to reach an agreement on them. NTBs are the product of how countries choose to organize their society and maintain public safety. Demanding changes is a much bigger ask, and concessions bring much greater political risk. Also, the fact that the United States has NTBs of its own—sugar and dairy are good examples—makes our demands look hypocritical.

The bottom line, if there is one, is that serious agreements will take longer and be more difficult to reach than the administration thinks. Meanwhile, we should nonetheless expect a parade of brilliant successes as framework agreements are announced.

William A. Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.