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Apologies to Pink Floyd for stealing their lyric, but it raises a timeless question now playing out in the world of trade policy: What is the best way to achieve your goals? Jake Sullivan, in a recent Jordan Schneider substack, asked the question a different way: Is it better to bully and coerce your target into doing what you want, or is it better to persuade them to do it? That’s a fancy way of asking which works better—sticks or carrots? Also to be parsed is timing. How does each approach work in the short term and also the long term? Spoiler alert: There is no definitive right answer, but there is plenty to discuss because trade policy has become a laboratory for both approaches.
Trump is clearly a believer in bullying and coercion. He would say he is using leverage, which is true, but both approaches use leverage. They just employ it in different ways. His approach to trade negotiations is consistently bilateral, which gives the United States more leverage because it is almost always the bigger party (China and the European Union are exceptions). His negotiating tactic is to make threats—high tariffs—and demand concessions, with the main carrot being that he will not carry out his threats if his demands are met. This sets up a series of discussions designed to reach an outcome where the other country does what he wants, and the only U.S. concession is to not do what he threatened.
So far, this approach has had a good bit of success. Only China and Canada have retaliated, and one of the minor mysteries of this whole episode is why other countries have not banded together and retaliated collectively. Many agreements have been negotiated. They are flawed—for the most part, they are not finished, not public, not legally binding, and not enforceable. Further negotiations to resolve different interpretations of what was agreed to, tie up loose ends, and address new demands from both sides will keep negotiators busy for years. But they do contain tangible concessions from a host of trading partners, in some cases, things previous administrations have sought and failed to get, as well as a boatload of additional revenue.
Previous administrations of both parties have taken a softer approach that uses persuasion through “normal” negotiations, which involve give and take from both sides. U.S. negotiators routinely prepare lists of what they want and lists of what they are prepared to concede in return. The objective has been to produce win-win outcomes for both sides by lowering trade barriers, increasing market access, and encouraging investment. That approach also achieved considerable success by producing numerous free trade agreements, beginning with Canada and Israel in the 1980s and then moving on to others in the Clinton, Bush, and Obama administrations. The Biden administration did not complete any free trade agreements, but its approach to trade was, for the most part, traditional and multilateral. This softer approach also uses leverage, but in a different way. Trump uses his leverage by threatening to cut others out of the U.S. market. His predecessors used it to persuade others to agree to the United States’ requests in order to obtain more access.
Both approaches appear to have been successful in the short term, in the sense that they achieved their goal of concluding agreements that, in the view of the president at the time, advanced U.S. interests. The long term, however, tells a different story.
Agreements reached via the traditional approach have been criticized by both parties for promoting offshoring, which has led to job losses and the erosion of U.S. manufacturing capabilities. However, that is a criticism of the result rather than the tactics employed to get there. The long-term effect of the tactics has been to cement relations with a wide variety of countries and, in the case of Asia, to reinforce the U.S. commitment to and presence in the region. Trump no doubt would argue that relations were good because we let the other countries take advantage of us. That’s debatable, but for some presidents, Obama being the best example, developing better relations was the main goal, not just a fortuitous byproduct.
It is too soon to evaluate the long-term impact of the Trump agreements, but there are indicators coming up. Bullying can achieve its immediate goal, but it often leaves an embittered adversary who owes the United States nothing, rather than a friend willing to support us on other matters of importance. A test of this will come up next March when the World Trade Organization considers whether to further extend the moratorium on internet taxation. The United States wants the moratorium made permanent. The two consistent objectors to that have been India and South Africa, countries Trump has been squeezing the hardest. This is a case where he must work within a multilateral forum if he wants to achieve his goal, and it will be interesting to see if countries he has irritated will help him out.
Returning to Pink Floyd, it seems that both tactics can get other countries to eat their meat, but only the traditional persuasive approach will deliver the pudding afterward.
William A. Reinsch is senior adviser and Scholl Chair emeritus with the Economics Program and Scholl Chair at the Center for Strategic and International Studies in Washington, D.C.
