08 Jul The Art of the Deal*

The Art of the Deal

What is President Trump’s strategy in trade negotiations with China … in the pre-negotiation sanctions imposed on Iran … in the sanctions imposed some time ago on and ongoing negotiations with North Korea … in the sanctions threatened against Turkey … in the tariff threats made and then abandoned against Mexico … in the tariff threats being made against the European Union … in the tariffs imposed on India … and in the tariffs and sanctions threatened and imposed on …? What are President Trump’s goals? How does he expect the confrontations negotiating processes to play out? What are the risks if things go wrong?

The President would say that it’s all about The Art of the Deal.

The “art” … in The Art of the Deal … is about the use of leverage. It’s about how to achieve mastery, how to attain and capitalize on a superior position in a negotiation. For the Trump Administration, the principles described in The Art of the Deal (the book) are being applied in the high-stakes game of global diplomacy in the same ways that Trump applied them in the world of business. In the business world, those who have the most money and/or are in a superior strategic position – or whose counterpart believes so– have the advantage and can use that advantage to leverage the better deal. In fact, if they have enough leverage, they can impose their preferred deal. In geopolitics, the question raised by The Art of the Deal is to what extent those who have the economic and/or military advantage can similarly use that advantage to leverage the desired outcome.

The U.S. is the global hegemon. It has the world’s largest economy and most powerful military. It is the destination of a disproportionate part of the world’s output – that is, the U.S. is almost every other country’s primary significant trading partner. That gives the U.S. immense negotiating power. Trump is attempting to apply that power, not only in negotiations with other countries, but also to leverage his domestic political agenda. How the use of America’s negotiating power and Trump’s pursuit of his domestic agenda might infect affect each other is unclear. He has said: “As far as China is concerned, they want to make a deal.” That has not been the case so far; “I really believe that Iran would like to make a deal.” That has not been the case so far; “I told Mexico very nicely that you can’t let people walk 2,000 miles up your country because if we have any more, we’re going to close our border.” The number of immigrants seeking to enter the U.S. through Mexico in 2019 has been steadily increasing and the border remains open; “China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA.” That’s not the consensus of economists; “[W]e’re [imposing big tariffs on] China, we’re doing that with India, we’re doing that with Japan, we’re doing it with a great new trade deal….” There has been no trade deal so far; “India, which is the tariff king, they called us and they said, ÔÇÿwe want to start negotiations immediately.’… I have spoken to Prime Minister Modi and he is going to reduce [certain tariffs] substantially.” That has not turned out to be the case so far. Trump also has attempted to utilize military threats. In Iran’s case: “I’m not talking about boots on the ground, I’m not talking we’re going to send a million soldiers. I’m just saying if something would happen, wouldn’t last very long.” In North Korea’s case: “[If] North Korea make[s] any more threats to the United States … [t]hey will be met with fire and fury like the world has never seen.” Trump has pulled back from taking any military action … so far.

This is the essence of the President’s application of The Art of the Deal to global diplomacy.

How does the President expect this game plan to play out?

With China, Trump first threatened and then imposed 25{29ea29b64b10057f61377b2c087cd5b7537a0cd24da4295a308b0bf589469f35} tariffs on $250 billion of Chinese goods. He simultaneously began an escalating security-oriented campaign against Chinese technology champion Huawei. Both impacted on the Chinese economy … with the certainty that the negative impact on China and the U.S. of a continuation will be significant. When the tariffs and Huawei campaign didn’t bring China to heel, he threatened to ratchet-up the pressure by imposing tariffs on an additional $300 billion of Chinese goods. These are the tried-and-true methods of The Art of the Deal. But when they didn’t result in the desired deal concessions from China, he backtracked. At his recent meeting with President Xi, Trump agreed to indefinitely defer the additional tariffs so that trade talks could restart … and, more significantly, agreed to ease curbs on Huawei. Secretary of State Mike Pompeo had been warning other countries about Huawei, attempting to build a global alliance by pressuring them to cease business with the high-tech company, calling it a “profoundly dangerous security threat”, which it is. Trump’s concession on Huawei drew a sharp rebuke from Republican Senator Marco Rubio, who called the decision a “catastrophic mistake [that] will destroy the credibility of [the Trump] administration…. [N]o one will ever again take [trade threats] seriously.”

What if China refuses to make a deal that addresses America’s justified concerns (see The Trade War with China in the May 22^nd TLR)? What compromise is Trump willing to make in order to declare victory and move on? What will he do if China plays the long game … much as China has done in the past? In short, what is the “deal” that the “art” is destined to lead to?

Iran is a more dangerous situation. Not only has the U.S. sent substantial military and economic force to the Persian Gulf, it also has talked tough, with Trump saying in the aftermath of Iran’s downing of an American surveillance drone that Iran will suffer “obliteration” if Americans (or, perhaps, American interests?) are attacked. Moreover, Administration officials have told Congress that Iran has ties to Al Qaeda that go back to 9/11 and that could be used by the Administration as a legal means to justify military action pursuant to the war authorization passed by Congress in 2001 … without seeking or receiving Congressional approval as required by the Constitution. This places a hair trigger in the hands of the President’s National Security Adviser, John Bolton, President. Under what circumstances might that trigger be pulled?

As part of its cancelation of America’s participation in the Obama administration’s Iran nuclear deal in 2018, the Trump Administration listed 12 demands that would be part of any new treaty with Iran. These included an end to support for terror groups and to Iran’s missile program. The apparent impact of those demands would have required regime change. Trump nevertheless subsequently said that America is not seeking regime change and that he wants to negotiate with Iran … even though the Administration’s words and actions convey the opposite message. The President last month softened his rhetoric further, saying that his goal is to ensure that Iran never has nuclear weapons – that is, he simply wants to extend the timeframe of the nuclear deal struck by President Obama, a deal he originally labeled a “disaster” and “the worst deal ever negotiated.” He now says, “I think they want to make a deal. And my deal is nuclear.” And, “I think Iran has tremendous economic potential. And I look forward to letting them get back to the stage where they can show that.” However, Bolton’s America’s most recent moves have boxed Iran into a corner in which negotiations have been ruled out by Iran until and unless the U.S. pulls back on its military build-up in the Middle East and on its sanctions war. Any such pull-back appears to be a long shot.

Although the “art” – or methodology – in The Art of the Deal has been apparent with respect to the President’s dealings with China and Iran, that “art” is perhaps most evident in the case of North Korea where the Trump process has been ongoing for a longer period. It has brought Kim Jung Un to the negotiating table … several times … although negotiations thus far have not led to any resolutions. With an estimated 20-60 nuclear weapons and the missile systems to deliver them, the U.S., South Korea and Japan are motivated to reach a denuclearization and peace agreement with North Korea … even more so than they had been for the prior 20+ years. The talks no doubt have been a positive first step. However, they haven’t made any apparent progress … and there appears little prospect of progress given the inflexible negotiating position of North Korea and the blatant economic and political support it receives from China. The “art” of negotiating with North Korea has been understandable. The question is, what is the “deal” and when, if ever, is America likely to see tangible results?

Some commentators, including some elected Republicans, have publicly questioned the President’s methods. They have noted that the President’s goal posts seem to be constantly in motion. Some have characterized that motion as an attempt to keep adversaries unbalanced … while others have questioned whether any goal posts actually exist and whether The Art of the Deal isn’t solely a political ploy. Trump threatens, is not specific about what he wants, is confrontational, then waffles, and offers to talk. He may claim victory, as he has done incorrectly prematurely previously with North Korea, Mexico and India. When progress is not readily apparent, he may change his tone unpredictably. That is what has happened with China and Iran. The scorecard thus far is blank – none of Trump’s originally-stated goals with respect to China, Iran, Mexico, Turkey, the EU, India or Venezuela has been attained … or appears likely to be attained in the near future. Moreover, thus far, no adverse political, economic or military events have overtaken the rhetoric. What might happen, however, if events should take the U.S. to an unintended place … for example, with Iran. What would Trump do? Even if events don’t get out-of-hand during his Presidency, what will be the effect on global diplomatic relationships America if Marco Rubio’s observation turns out to be correct?

Finally (from a good friend)

*┬® Copyright 2019 by William Natbony. All rights reserved.