On NAFTA, Trump And His Advisers Are Mixing Ego And Economics
America’s allies are befuddled by the sudden imposition of punitive tariffs and demands for re-negotiation of long-standing trade deals, as are many Americans whose jobs rely on selling things abroad. The Trump administration keeps pounding its chest and saying they’re master negotiators who will fix bad deals but no one seems to know what they want a good deal to look like and are confused by ridiculous “sunset provisions” that would limit how long the trade agreements stay in force. So really, what does Trump actually want?
The short answer is that the “brain trust” that he assembled just wants to make sure there are no more trade deficits with other nations. This is why they’re forgoing the objective and well-understood benefits of multilateral trade agreements for a tangled, overly complicated web of bilateral ones which all demand an instant re-negotiation if a deficit does arise. This is why they wanted to blow up NAFTA and tasked Vice President Mike Pence with demanding that Canada agrees to a five year limit on the terms of any deal they negotiate this year.
To explain just how asinine and detached from reality this idea is, imagine for a moment that you’re a freelancer looking for an apartment to rent. You agree to a typical set of terms. There’s a security deposit, the rent is so many dollars a month, and the lease runs for a year. But before you sign the paperwork, you demand that if your income should dip so the rent is more than a certain percentage of your income, you get to renegotiate the lease completely. Furthermore, you want to review the lease every quarter and try to drive the rent down as well.
Your odds of getting that apartment under these absurd terms are somewhere between winning the Powerball and being caught in an actual sharknado. It’s not your landlord’s problem if your business isn’t doing well one month and his job is to make sure he has steady income to keep providing his services. There are other possible tenants who still have a grip on reality and aren’t suffering from what should be called Populist Entitlement Syndrome, or expecting special treatment without actually doing anything to warrant it. No nation is going to gamble with its well being and finances solely to appease a guy who put his name on some hotels and pretend fired people on a TV show for a living while failing to make a profit selling vodka to Russians.
And this is what Trump and the advisers his son in law recruited with brief Google searches — no, seriously, that’s exactly how Jared Kushner found these so-called experts — don’t seem to understand, according to a recent Politico feature. Trump’s power as a negotiator was mostly a figment of marketing for the last 35 years, and he believes he’s such a huge celebrity that world leaders will be wowed by his sheer presence, like 1980’s hair metal groupies, and willingly shoot themselves in the foot to the tune of tens, if not hundreds of billions of dollars. Meanwhile, his advisers believe that in order for Americans to win, other nations must lose, which is the most counterproductive position for the start of any negotiation, and that a trade deficit doesn’t mean we need to fix issues with an economic sector or try new ideas, but a personal affront.
But the message it sends to our current and future trade partners is to keep away and try not to invest too much because their investments will be subject to vindictive terms by vain old men with a zero-sum mindset who will punish your success with punitive tariffs and forced re-negotiations. Over the long term, this means less trade, fewer allies, higher prices for just about everything, even more automation in an attempt to offset price hikes, less and slower economic growth alongside frequent tantrums from “trade experts” who don’t seem to understand the most elementary basics of trade. So it’s not exactly surprising that Canada, Mexico, and EU are either planning to impose retaliatory tariffs targeting the GOP base, or have already started doing so. They’re not obligated to tolerate Trump’s whims, no matter how much that may surprise the administration.