The Art of the Deal
Explaining Trump’s Trade Bluster

It’s been a dizzying week for those trying to parse President Trump’s trade policies, with a succession of rapid reversals on NAFTA sending shock waves through the establishment. FT:

Mr Trump said he had been ready to submit a notification with withdraw from the North American Free Trade Agreement “two or three days from now” but had decided against it after speaking to his Canadian and Mexican counterparts.

“They asked me to renegotiate and I will and I think we will be successful in the renegotiation, which frankly would be good,” Mr Trump said, conceding that pulling the US out of the pact that underpins more than $1tn in annual trade and the North American supply chains that many US companies rely on would be a “pretty big shock to system”.

But he added: “If I’m unable to make a fair deal for the United States, meaning a fair deal for our workers and for our companies, I will terminate Nafta.”

Trump’s NAFTA brinkmanship is just the latest in a series of showy populist gestures. In the past two weeks, Trump has signed a “Buy American, Hire American” executive order, ordered investigations into steel and aluminum dumping, dispatched his Vice President to harp on trade deficits in Asia, and threatened a trade war with Canada over its softwood lumber and dairy industries. Are Trump’s protectionist impulses now roaring back, with Steve Bannon and the nationalists taking over the economic agenda at the White House?

Color us skeptical. Tune out the noise, and Trump’s position on trade appears more mainstream than commonly understood. Trade disputes over Chinese steel or Canadian lumber are nothing new; the past three administrations all lodged complaints along these lines. And despite his grandiose threats and symbolic executive orders, Trump has so far refrained from uprooting existing trade arrangements. Trump remains opposed to new multilateral free trade deals like TPP, but he is willing to work within existing frameworks like NAFTA to exploit loopholes and (hopefully) negotiate a better deal.

For all his theatrics, Trump could wind up a moderate on trade, tinkering around the edges of existing trade deals while cutting new bilateral ones with allies like Japan and the EU. Trump is nothing if not a showman; he knows how to capture attention with extreme demands, and he is likely to continue doing so. But so far, Trump’s grandstanding on trade looks like another manifestation of placebo politics: a symbolic affirmation of his working-class base that could resonate with voters without fundamentally changing the system.

That may be a disappointment to the true believers who want Trump to withdraw from NAFTA and the WTO outright, hike tariffs on Chinese steel, and impose that wall-funding 20% tariff on Mexican imports. But there is reason to believe that behind the bluster, Trump’s actual policy on trade might be a more sober one.

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