The Trouble With Trump’s Tariff Threats—And With a Critique of Them

Posted in: Immigration Law

As a result of negotiations last week between Mexican diplomats and U.S. officials, the North American economy narrowly averted a potentially serious self-inflicted wound. President Trump had threatened escalating tariffs on all Mexican goods if Mexico did not stop the northward flow of Central American migrants. The tariffs were suspended at nearly the eleventh hour after Mexico agreed to send more personnel to its southern border to interdict migrants—although it appears that Mexico had agreed to take the relevant actions months before Trump’s recent tariff threat. Then, perhaps fearing pushback from his strongly anti-immigration supporters, the President tweeted that he could impose tariffs after all if Mexico failed to hold up its end of the bargain, adding that tariffs would be “very profitable.”

There is so much wrong with Trump’s behavior during this episode that it is hard to know where to begin. First, the President’s goal of halting asylum seekers and other desperate migrants is immoral and, to the extent that it stops bona fide refugees, probably illegal. Second, as just about every economist on the planet agrees, tariffs are not profitable. They are a tax on U.S. consumers and, given the substantial integration of the U.S. and Mexican economies, on U.S. businesses as well. Third, even if one thinks that the threat of tariffs that harm everyone could lead to valuable concessions, repeatedly threatening tariffs imposes long-term damage to the credibility of the U.S. as a negotiating partner. Trump is hoping that Congress will approve his tweaked and renamed version of NAFTA—the USMCA—but other countries will be reluctant to sign agreements with the U.S. so long as the self-professed great dealmaker persists in treating every deal as a mere starting point for making additional demands whenever a Fox News segment piques his anger.

Accordingly, Trump richly deserves the scorn that critics heaped on him for threatening tariffs, then falsely claiming to have succeeded in obtaining important concessions, and then threatening tariffs again. There is no method to his madness.

That said, one popular line of criticism of the President over this episode seems problematic. Various commentators argued that issues of immigration and trade ought to be kept separate—that Trump was acting improperly by conditioning conduct in one area on conduct in the other. Yet why should that be so? After all, many people think that Trump and prior Presidents should link trade with other issues.

For example, President Trump has embroiled the U.S. in a trade war with China. Whether, when, and how it will be resolved remains to be seen, but it does not appear that the Trump administration has made China’s recent establishment of concentration camps for Uighurs in Xinjiang or other human rights violations an issue in trade negotiations. Should it? Many activists think so. And if it is legitimate to tie trade to human rights, why is it not legitimate to tie trade to migration or other policies?

Anything Can Be Relevant to Anything Else

We can distinguish the Mexican and Chinese cases by pointing to the goals. Trump threatened Mexico with tariffs in order to pressure Mexico into taking actions that threaten human rights, not protect them. That is an important distinction, of course, but not entirely responsive, because some of Trump’s critics—including Mexico’s economy minister and a former director-general of the WTO—argue that trade and immigration are separate issues that simply should not be mixed. Yet if that is true, then it would be illegitimate for the U.S. to tie trade and immigration together even if Mexico were violating migrants’ human rights and the U.S. were seeking actions to protect them.

More broadly, the U.S. and other countries frequently use access to markets as leverage for other purposes. Sanctions in the form of trade restrictions on business with Iran, North Korea, and Venezuela all aim at goals that have little to do with the terms of free trade.

Indeed, even trade agreements that focus on trade alone tend to mix subjects. Imagine trade negotiations between Country X, which exports cars and other high-value manufactured goods, and Country Y, which exports corn and other commodity crops. Negotiators for X might demand that Y lower tariffs on cars in exchange for X lowering tariffs on corn. If a negotiator for Y were to respond that the discussion should be limited to X’s corn tariffs, rather than complicating matters with a discussion of Y’s car tariffs, X’s representatives would rightly reject that contention. Corn and cars might trade in different markets, but each side understandably uses its leverage to obtain what it wants with respect to the markets that matter to it.

Thus, just as cars can be made relevant to corn if a government cares about cars, so migration can be made relevant to trade if one country or the other cares about migration. We should not let the immorality of Trump’s goals or the inanity of the means he uses to advance them blind us to the flaws in the always-keep-trade-separate argument.

No Bright-Line Rule

Does it follow that there are no limits to the issues that may be legitimately tied to other issues? No, but it is difficult to formulate bright-line rules. Perhaps the best we can do is identify some guiding principles.

First, it is never a good idea for one country to demand something affirmatively harmful to the other and itself. Trump routinely violates this seemingly obvious principle, so lately we have had not had much reason to consider other principles that would be relevant to a less petulant and irrational leader.

Second, demands rooted in morality should avoid hypocrisy. One need not and should not embrace moral relativism to see that some of what we may regard as universal moral principles are rooted in our own specific cultural norms. I sometimes am asked to sign petitions demanding an end to some foreign practice that is condemned as cruel to animals—such as raising dogs for food, as occurs in some parts of Asia. As a dog lover, I am saddened and sickened by this practice, but as a vegan I am also saddened and sickened by how the vast majority of my fellow citizens treat cows, chickens, pigs, and other animals raised for food. A demand by the U.S. that, say, South Korea forbid the dog meat trade in exchange for access to our markets for electronics would be hypocritical.

Third, negotiators should be aware that leverage can backfire. Two phenomena compete. Tariffs and economic sanctions can pressure countries to take the steps demanded, but they can also leave the target of the sanctions isolated and drive it into the arms of geopolitical rivals. Conversely, according to the theory known as “doux-commerce,” engaging in trade breeds civilized manners and peaceful relations. The point is not simply that countries should deploy carrots rather than sticks, but that the dispensation of carrots should not be tied to any particular outcome; trade itself will pay positive benefits for both sides.

That is not to say that leverage and tough talk have no place in international relations or in any other context in which negotiations occur. People often respond rationally to incentives.

Nonetheless, the logic of tariffs, sanctions, and leverage should be used judiciously, because it is largely zero-sum. Yet the whole logic of trade is win-win. If X has more cars than it can drive and Y has more corn than it can eat, then X and Y both benefit when they trade cars for corn.

The win-win nature of effective trade policy may explain why Trump has created unnecessary trouble with American trading partners. Trump believes in win-lose, not win-win. As a businessman, he made money by stiffing creditors and by extracting value from failing ventures while leaving others holding the bag. As a politician, when Trump talks about “winning at trade,” he envisions other countries losing.

Trump’s critics are wrong to suggest that trade should never be linked to other issues or used as leverage. But they are not nearly as wrong as Trump himself, whose lack of understanding of economics is exceeded only by his ego.

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