Trump's blustery tweets could undermine his China negotiations
President Donald Trump’s strong rhetoric and new tariffs may drum up support from his base, but there’s ample evidence of their counter-productiveness to the administration’s goals of better international trade.
Aggressive trade policy and action can yield concessions and other positive results like the new trade deal with South Korea and increased pressure on North Korea by China, as Ian Bremmer of Eurasia Group has noted.
But it can also turbocharge a spirit of animosity between an international relationship that can severely shake up the dynamics of dealmaking.
We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!
— Donald J. Trump (@realDonaldTrump) April 4, 2018
The Fake News Washington Post, Amazon’s “chief lobbyist,” has another (of many) phony headlines, “Trump Defiant As China Adds Trade Penalties.” WRONG! Should read, “Trump Defiant as U.S. Adds Trade Penalties, Will End Barriers And Massive I.P. Theft.” Typically bad reporting!
— Donald J. Trump (@realDonaldTrump) April 5, 2018
“Up to this point, China has clearly tried to leave itself an out to negotiate with Trump,” wrote Patrick Chovanec, chief strategist at Silvercrest Asset Management, in a Twitter thread. “But if he keeps raising the stakes so publicly, they will conclude he is bent on humiliating China, and the political cost of being seen to bend to him will rise. This happened with Mexico.”
Mexico all over again
From the outset of the campaign, which began with the infamous “rapists” monologue, Trump has harangued Mexico with tweet after tweet. As Yahoo Finance reported last year, the attitude south of the border became so toxic to Trump that any cooperation by Mexican President Enrique Peña Nieto on a border wall would be seen as “treason.” As Mexican journalist Alejandro Hope put it to Yahoo Finance, these are issues of “national pride and national dignity.”
So far, Mexico has not paid a cent for Trump’s wall, but the president has demanded funding from Congress, and also asked the military to pay for it.
With Mexico being one of the highest crime Nations in the world, we must have THE WALL. Mexico will pay for it through reimbursement/other.
— Donald J. Trump (@realDonaldTrump) August 27, 2017
We are in the NAFTA (worst trade deal ever made) renegotiation process with Mexico & Canada.Both being very difficult,may have to terminate?
— Donald J. Trump (@realDonaldTrump) August 27, 2017
Trump’s aggressive rhetoric didn’t stop at the wall and went into trade and Nafta, leaving Mexico in a position of having to take a hard line, again to preserve dignity. So far, it has not made the concessions Trump wants, leaving the Mexican business community with the view that Nafta was dead and that it should move on.
“I think Trump has been very surprised by his inability to get either Mexico or Canada to budge on Nafta, or to drive a wedge between them. He assumed they were both just weaker and would have to fold by now,” Chovanec continued.
Though Trump’s own rhetoric constantly highlights American pride and dignity, his actions and tweets suggest he forgets that other countries also have strong national pride that can shape policy. Now this situation is rearing its head in China.
“Trump isn’t the only one with a base, you know,” said Chovanec.
Jorge Guajardo has a unique view of Mexico, China, and the U.S., having been an Ambassador to China from Mexico and a consul general in Texas. He told Yahoo Finance that Trump’s rhetoric in China will put President Xi Jinping into a corner, just as he did with Mexico.
”You can not conduct these things through humiliating other countries — it puts their leaders in an impossible position,” Guajardo said. “They cannot be seen to concede anything under pressure. They’d rather endure hardship than be humiliated. It’s doomed to fail.”
Neither Peña Nieto nor Xi has to worry about re-election — a Mexican president serves a single six-year term called a sexenio and Peña Nieto’s is almost up — but Guajardo noted that the societal pressure still applies. And in the midst of a trade standoff, it’s even more pointed.
“Every president, whether term-limited or for life, has to earn his mandate every day,” Guajardo said. “The whole thing about Xi for life is so that he can make China strong, he will not remain president for life by showing weakness.”
The backfiring potential of aggressive rhetoric was laid bare by China’s Ministry of Commerce spokesperson Gao Feng on Friday, who said the aggression would result in “lifting the rock to smash their own feet.”
“Under these circumstances, it’s impossible to discuss any negotiations on the issue,” Feng said. “We will never seek any confrontations, but if confrontations come our way we will resolutely fight back.”
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Ethan Wolff-Mann is a writer at Yahoo Finance. Follow him on Twitter @ewolffmann. Confidential tip line: FinanceTips[at]oath[.com].
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