It’s by now a well-known part of President Donald Trump’s deal playbook: Set an arbitrary deadline and intimidate those who don’t meet it. But this week, he may be testing the limits of that strategy.
As his Wednesday deadline was approaching for nations to make trade deals with the United States, the president first issued new threats to those dragging their feet, and then extended the deadline. Again.
On Monday, President Trump announced a new 25% tariff on goods entering the U.S. from Japan and South Korea and other rates for a dozen other nations. The new rates and a new deadline of Aug. 1, included in letters posted on his Truth Social account, launch what is expected to be a wave of missives to trading partners outlining new levies on goods that they hope to sell in the U.S.
Why We Wrote This
President Donald Trump hopes to bully nations into trade deals, but that strategy may not work. Of the three deals announced so far, only one is in writing. The others were noted on his social media.
The move puts pressure directly on those nations – and implicitly on others – to keep negotiating for better terms.
The risk for President Trump is that, having heard his bark, world leaders may be losing fear of his bite and ignore the deadline. The risk for those leaders is that they may be underestimating his determination to make the U.S. less reliant on trade, even if it damages the American economy in the process.
For Mr. Trump, “It’s a narrative of victimization: The U.S. has been taken advantage of for decades by evil foreigners stealing our jobs, undermining our economy, and compromising our security,” says Bill Reinsch, senior adviser at the Center for Strategic and International Studies. “And he’s going to fix it. … It really is a question of deeply held belief and principle with him.”
His solution is tariffs, a tax on foreign goods coming into the U.S. In recent weeks, the president has ratcheted up his threats, singling out specific trading partners, including Canada, Japan, the European Union, and, most recently, the BRICS, a group of trading nations that includes Brazil and India. On Sunday, he posted that he would impose an extra 10% tariff on any nation adopting the “anti-American policies” of the BRICS. “There will be no exceptions.”
The latest threats to Japan and South Korea came in the form of letters Mr. Trump sent to more than a dozen nations, delineating the tariffs to be imposed if they don’t reach a deal with the U.S. By setting tight deadlines and threatening countries with the consequences of not meeting them, the president hopes to gain an edge in bargaining.
Car salesman or diplomat?
“It is a recognizable form of negotiation,” says Michael Morris, a Columbia Business School professor and author of a new book, “Tribal: How the Cultural Instincts That Divide Us Can Help Bring Us Together.” But “It’s more associated with the negotiation techniques of a car salesman or a condo salesman than a diplomat.”
So far, it’s not clear how well these tactics have worked. In April, the Trump administration announced that it would complete “90 deals in 90 days.” Of the three trade agreements that Mr. Trump has announced so far, only in the deal with the United Kingdom has the actual text been made public. Much of what Americans know about the China and Vietnam deals is what the administration has said about them.
And these deals aren’t agreements in any traditional sense, trade experts point out. They’re more frameworks for what the parties will talk about than comprehensive agreements spelling out the terms of trade. Even the deal with the U.K. contained far more language about what disputes the nations would try to solve than precise terms of trade between the two, experts say.
“I don’t think they’re that meaningful, and I think markets will understand,” says Ryan Chahrour, a professor of economics at Cornell University. “They know that this is not the final word.”
Zigzags, “TACO trades,” and the search for new partners
Mr. Trump’s zigzag course on tariffs may have hurt his credibility and could diminish U.S. trade prospects. After he announced sweeping tariffs in April on what he called “Liberation Day,” financial markets plunged. Over four days, the S&P 500 dropped by 12%. Mr. Trump backed down, pausing the threatened tariffs for most nations for three months. Soon after, editorialists and Wall Street traders, frustrated by the president’s on-again, off-again tariff threats, began to refer to the “TACO trade,” an acronym for “Trump always chickens out” when his policies look like they will hurt the economy.
In the wake of the president’s moves, other nations have begun to look beyond the U.S. market to sell their goods. In May, the U.K. and India sealed a trade deal that lowers tariffs on each other’s imported goods. Brazil and Mexico are working to expand their trade ties. A South American trade group called Mercosur finalized a free trade agreement last week with Norway, Iceland, Switzerland, and Liechtenstein. The chief executive of the European Union is pushing to team up with the trade bloc of mostly Pacific nations called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP.
Other nations “haven’t just been sitting around and just considering the U.S. their only option,” says Peter Kim, a professor of management and organization at the University of Southern California’s business school. “China has been reaching out to them, and they’ve been reaching out to one another. So there’s a lot of backroom conversation going on.”
A matter of credibility
Such deals give nations alternatives to trade with the U.S. and, thus, leverage when bargaining with it, says Professor Kim.
How much leverage depends on how dependent they are on the American market. For many nations, the alternative commerce will not make up for the trade with the world’s largest economy. Even if it does, they may need certain advanced American goods, such as cutting-edge chips and artificial intelligence software. So they’re unlikely to cut off talks with the U.S., trade experts say. In his letters, the president is also trying to discourage nations from imposing countertariffs on U.S. goods.
“If for any reason you decide to raise your Tariffs, then, whatever number you choose to raise them by, will be added onto the 25% that we charge,” he wrote to South Korea – and similarly to the others.
Of course, the U.S. has needs of its own, such as access to strategic rare-earth metals, which means Mr. Trump is unlikely to shut down negotiations with nations that supply those metals. That offers nations like China some leverage.
Economists say the uncertainty generated by the tariff threats is slowing the U.S. economy. On Monday, the S&P 500 fell by almost 1%. Despite these risks, the president may feel a need to reestablish the credibility of his threats in trade negotiations by actually imposing the tariffs.
“Trump was really, really annoyed by the TACO thing,” says Mr. Reinsch of the Center for Strategic and International Studies. “And I think he has to prove that that’s wrong.”
