A Parade of Rants

Those of you who listen to the Trade Guys podcast know that both my colleague, Scott Miller, and I frequently rant on various trade subjects—and have a grand time doing it. It turns out we are in good company. You may have noticed that Donald Trump has been known to toss off a rant or two from time to time. Lately, these have been falling into a pattern that we may see more of as the next tariff day approaches on July 9.

The pattern is simple, up to a point. Donald Trump typically rants in an attack on one of the many nations the United States is negotiating with on trade. China was first, followed by the European Union, then Canada, and most recently Japan. Trump often criticizes the other country’s behavior, typically centered on an unwillingness to do what he wants, and then threatens dire action, usually a massive increase in the tariffs he has already threatened or, as in the case of Canada, a cessation to negotiations. Then he waits to see what the other country will do.

Responses may differ. China retaliated and stuck to its position, which ultimately led to an agreement that could best be characterized as a ceasefire and another month of talks. (Since the text has not been made public, it is hard to be more specific than that.) The European Union, which was basically accused of slow-rolling the negotiations and not taking them seriously, responded by saying it would pick up the pace. If it did, it’s hard to tell, and most observers would say the European Union is still taking the slow road. Canada, which received a very specific attack—its maintenance of a digital services tax—folded almost immediately. Japan, which was similarly accused of specific transgressions—not buying U.S. rice or automobiles—has not, as of this writing, revealed its next move. A popular question among trade wonks now is who the next victim will be, but most observers are reluctant to hazard a guess.

There are two ways to interpret this pattern. The first is that it demonstrates Trump’s normal negotiating style—large demands, big threats, and impatience for an outcome. The second is that it reflects increasing desperation about prospects for more deals. The latter grows out of a crucial change in rhetoric that occurred in March. During the election campaign last fall, he defended his tariff proposals as cost-free for Americans—other countries would pay. Starting in March, the argument changed. There would be costs, but they would be short-term and lead to big gains. However, by acknowledging the costs, he took on the burden of obtaining the benefits. The tariffs are the costs; the agreements are the benefits. If there are no agreements, it will mean a failure of his negotiating strategy and a failure to produce gains for the U.S. economy.

At this point (July 6), there are only three agreements, with only one available text—the agreement with the United Kingdom, which I characterized in a previous column as 80 percent aspirational and 20 percent tangible. The agreement with China appears to be a draw, with tariff reductions from both sides and two apparent trade-offs—magnets for students and minerals for export controls. The Vietnam agreement, if Trump is describing it accurately and fully, appears to provide some significant gains in market access for the United States while imposing a 20 percent tariff on Vietnamese imports. The new and potentially important provision is a 40 percent tariff on transshipped items, which is designed to prevent China from circumventing the tariffs placed on it. Its effectiveness will depend on how transshipment is defined, on how the provision is enforced, and on whether the administration can impose the same provision on other countries. If they can’t do that, then they’re just playing whack-a-mole as Chinese companies migrate from country to country. These questions cannot be answered without the text, but rumors suggest the agreement is more of a loose aspirational framework than Trump is saying.

This week, I expect a mixed bag. There will be some additional agreements—Switzerland is rumored to be close, as is India, though most observers are skeptical of that. There will be some extensions of negotiations for countries Trump believes are negotiating in good faith, and there will no doubt be designated victims of his policy. Since he has been so obviously irritated by the “TACO” accusation (“Trump Always Chickens Out”), he needs to punish someone, and there is no shortage of targets. He has said letters assigning tariffs are forthcoming, but with expected August 1 start dates, these letters will likely be more threats and postponements.

If Trump remains true to form, a detailed analysis of the week’s outcome will be impossible, as actual texts will likely not be made available. The most likely result will be a small pile of aspirational “framework” agreements in which the two sides agree to further talks on specific subjects like digital trade and pharmaceuticals. By the time an accurate evaluation of them can be done, nobody will be paying attention because people will have moved on to the next summer trade blockbuster—new sectoral tariffs on pharmaceuticals, semiconductors, trucks, and aircraft pursuant to the current Section 232 investigations. The result is that the rollercoaster ride will continue, so strap yourselves in and get ready!

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.