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.
“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 Pe?a 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.
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.
U.S. President Donald Trump tosses a hat into the crowd as he arrives to speak at Marine Corps Air Station Miramar in San Diego, California, U.S. March 13, 2018. REUTERS/Kevin Lamarque TPX IMAGES OF THE DAY
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 Pe?a Nieto nor Xi has to worry about re-election — a Mexican president serves a single six-year term called a sexenio and Pe?a 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.”
Chinese President Xi Jinping walks to deliver his speech at the closing session of the National People’s Congress (NPC) at the Great Hall of the People in Beijing, China March 20, 2018. Picture taken with a slow shutter speed. REUTERS/Damir Sagolj TPX IMAGES OF THE DAY
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].