Byron Blake | Donald Trump’s tariff debacle: the art of how not to negotiate

Donald Trump’s opening gambit in his 2025 global tariff policy is a textbook case of how not to negotiate. It exposes the difference between reality TV, his speciality, and real-life negotiation.

This is President Trump’s second time using tariffs for negotiations. His foils have memories. Negotiations are more likely to be successful with one objective. The tariff policy has many, and increasing objectives. These include:

• Revenue from exporting countries to help cover the projected budget deficit. (Tariffs are taxes paid by importers/consumers).

• Mechanism to bring manufacturing production/investment back to the US and incentivise domestic production.

• Levelling the international trading field so that US’ exporters have a fair shot in other markets.

• Forcing China to the negotiating table.

• Eliminating the Large US visible trade deficit. In addition to being internally inconsistent, the objectives are confusing to the various Parties. What precisely is required of each to satisfy the US’s unspecified need?

Negotiations are more likely to be successful where there is one target and a strategy to build coalitions against that target. The tariff policy targets almost every country on the globe. The hope seems to be that individual countries will panic and rush to the “King” to concede and “negotiate” on the “Emperor’s” terms.

But, in the reality of global politics, there is an equal possibility that some friendly countries or groups could develop coordinated responses. Given memories and the seeming randomness of the policy, it could even encourage coalitions among former “enemies”. In such situations the outcomes are indeterminate.

Negotiations are more likely to be successful where there is some semblance of justification. It is well-known that the global trade rules under the GATT and currently under the WTO were cut to fit the United States (US). With the US as the dominant producer of manufactured goods, the various rounds of GATT negotiations focused on enhancing market access for manufactured goods. By the 1980s when the World Trade Organisation (WTO) was negotiated the structure of the US economy had changed. With developments in computer technology, information and communication technology, genetic engineering, biotechnology, and research and development generally that enabled the global delivery of services, the US had evolved into a service economy. Its interest shifted to promoting services and protecting its patents.

In 1980 US entities were the holders of 62 per cent of all patents issued in that year. In addition, through a range of subsidies enacted in various “Farm Bills” the US had become a dominant agricultural producer with excess products for the global market. The US, with the support of the European Union, forced a broadening of trade that would be brought under global rules. There is trade in goods (the old GATT); Trade in services: and trade in agriculture. The regimes have significantly contradictory rules.

The major contradictions reflected US interests. For Trade in goods, the rules are designed to achieve free access (zero or low tariffs, no quantitative restrictions, and no charges that are not applied to similar local products). In the case of Trade in services, the primary purpose of the Rules is to protect the patent and patent holders for periods much longer than under previous international regimes. And, for Trade in agriculture the rules seek to liberalise trade in agricultural produce but simultaneously to permit the use of “subsidies” or “support” where they apply in the US’ “Farm Bills” or in, EU decisions.

TARGETING CHINA

Targeting China without a strategy for building coalitions seem childish. Publicly challenging a settled dictator, who has resources, to a game of “chickens” is unlikely to be a winning proposition. Ratcheting up his 104 per cent tariff to 125 or 145 per cent because China matched his 50 per cent increase taking its tariff to 84 per cent, will, in all probability, not bring China to Washington. There is the national pride of a country with over 2000 years of survival. There will be minimal, if any trade by either country at such tariff levels. Perhaps most relevant, President Xi knows President Trump’s Achilles’ heels including:

• A consuming and voting population with a low pain threshold.

• Private company and individual stock and bond-holders, and brokers who watch markets closely for gains and losses.

• A competitive and investigative media.

• Politicians interested in their political future.

• Huge indebtedness to third countries, including China.

He is also aware of his strengths, including:

• Being an absolute leader for 12 years and with no immediate challengers.

• Having a large domestic market and innovative capacity.

• Having 37 of the 44 most critical technologies currently.

• Having several areas, including bonds and cultural imports, with which he can impact the US economy and society.

• Having invested liberally over the past several years in a range of countries he has “friends” across the globe.

• Having a population with a high “tolerance” for pain which is likely to stick with him.

• Having time – a younger man with no election pressures and a population which takes the long view.

The impact of a long trade dispute between the two largest economies will be brutal not only for their economies but for the global economy. President Xi will not be blamed for either starting or escalating the trade war.

TARIFFS AND CARICOM

President Trump initially imposed different levels of tariff against different CARICOM countries. Since no CARICOM country retaliated, we assume that the 10 per cent now applies to all. But even then, the underlying assumption that individual CARICOM countries will find their way to Washington to negotiate is not possible. Like the European Union, CARICOM countries have been members of a customs union sanctioned by the GATT and continued by the WTO for over 50 years. The conditions are that members maintain a “common” tariff at the border, and do not discriminate among third countries. The effect of these rules, agreed by the US, is that CARICOM countries would have to negotiate as a group and any concessions made to the US extended to the world. Apart from any taxes collected from its citizens, there would be no benefit to the US and possible significant losses for the CARICOM states, long-time friends of the US.

Ambassador Byron Blake is former deputy permanent representative of Jamaica to the United Nations and former assistant secretary general of CARICOM. Send feedback to columns@gleanerjm.com