The Danger of Trump’s Mexican Tariff Stunt

There are lessons for China, the European Union and Japan. This column appeared in the Washington Post.

Leaders in foreign capitals are likely updating their trade war strategies after watching how President Trump handled his confrontation with Mexico. 

The episode provides a couple of important lessons for governments (think: China, the European Union and Japan) still facing their own showdowns with the Trump administration. 

For one, Trump’s willingness to threaten a top trading partner with stiff tariffs — even as his administration pushes ratification of a trade pact with Mexico and Canada as its top legislative priority — sends a clear message about the president’s respect for his own trade deals. That is, even a signed agreement offers no protection against Trump deciding, with no warning, to launch new hostilities.

What’s more, the warmed-over offers from Mexico that Trump is touting as a major victory, along with an unverified claim about new farm purchases, suggest the president cares less about substance than his ability to declare a win. As the New York Times’s Michael Shear and Maggie Haberman detailed over the weekend, the deal “consists largely of actions that Mexico had already promised to take in prior discussions with the United States over the past several months, according to officials from both countries who are familiar with the negotiations.” And Bloomberg News found no support for Trump’s assertion, via tweet, that Mexico has agreed to “immediately begin buying large quantities of agricultural product from our great patriot farmers.”

Trump pushed back on the reporting Sunday, including by teasing “some things” the two countries agreed on but haven’t announced yet….

Nevertheless, Trump’s bolt-from-the-blue tariff threat to curb the border crisis and his rapid climbdown — the entire episode lasted nine days — suggest that negotiators who find themselves across the table from Trump’s trade team would be smart to keep meaningful concessions to a minimum. 

As the president just demonstrated, he is now willing to use tariffs as a cudgel to secure policy aims outside the trade arena. That means a country could make painful sacrifices to secure a trade pact only to be left staring down the barrel of a fresh tariff threat over a non-trade matter. 

“No matter what the situation, you will be facing tariffs from the U.S., so you might as well not make any concessions,” Jorge Guajardo, a former Mexican ambassador to China now with McLarty Associates, told the Wall Street Journal (as the WSJ’s Nick Timiraos noted on Twitter.)  

And Trump further undermined his leverage in future talks by accepting a quarter-loaf deal and celebrating it as a total vindication in the face of building domestic pushback from congressional Republicans, business leaders and some in his own administration.
It will surely be harder for him to earn true concessions if foreign counterparts believe that maximalist demands from Trump today could dissolve in the face of a wobble in U.S. economic performance, or if the stock market stumbles, or if pressures from Congressional investigations or the 2020 race increase pressure to secure a big win.

Source: Analysis | The Finance 202: How Trump’s Mexico showdown undermines his standing in other trade talks

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