Trump’s Trade Negotiations: A Game of Chicken
President Donald Trump and his team had ambitious plans for global trade negotiations back in April. They promised a rapid round of talks with dozens of countries, with White House trade adviser Peter Navarro predicting “90 deals in 90 days.” The administration claimed that other countries were eager to make concessions to avoid the massive import taxes — tariffs — that Trump was threatening to impose on their products starting July 9.
However, after 90 days, the number of completed trade deals remains low. Only two agreements have been finalized: one with the United Kingdom and another with Vietnam. Additionally, Trump has announced a framework for a deal with China, although the details are still unclear. He has since extended the deadline for negotiations to August 1, while adjusting the threatened tariffs, leaving the global trading system in a state of uncertainty. Businesses are delaying decisions on investments, contracts, and hiring due to the lack of clarity regarding the new rules.
William Reinsch, a former U.S. trade official now advising the Center for Strategic and International Studies think tank, described the situation as a “rerun.” He noted that Trump and his team do not have the deals they want, so they continue to pile on threats. This pattern has led to the label TACO — an acronym coined by The Financial Times’ Robert Armstrong standing for “Trump Always Chickens Out.”
The repeated cycle of threats and extensions has become a familiar tactic for Trump. As Reinsch pointed out, it’s classic Trump: “Threaten, threaten more, but then extend the deadline.” The question remains whether Trump will extend the deadline again if he still doesn’t have the deals by August 1.
The Challenge of Global Trade Negotiations
The deal drought highlights a clash with reality. Negotiating simultaneously with every country on earth was always an impossible task, as Trump himself admitted last month during an interview with Fox News. “There’s 200 countries,” he said. “You can’t talk to all of them.” Many trading partners, such as Japan and the European Union, were likely to resist Trump’s demands unless they received something in return.
Chad Bown, an economic adviser in the Obama White House and now a senior fellow at the Peterson Institute for International Economics, emphasized the difficulty of negotiating trade agreements. Even when dealing with just one country or a small regional group, these negotiations usually take several months. What the administration is attempting is far more complex — negotiating multiple agreements simultaneously.
The Impact of Trump’s Tariff Strategy
The drama began on April 2, which Trump called “Liberation Day.” On that day, he announced a baseline 10% import tax on all countries and what he referred to as “reciprocal” levies of up to 50% on countries with which the United States runs trade deficits. The 10% baseline tariffs appear to be here to stay, as Trump needs them to help fund the hole created by his massive tax-cut bill in the federal budget.
These tariffs represent a significant shift in American trade policy. Tariffs averaged around 2.5% when Trump returned to the White House and were even lower before he started raising them in his first term. However, the reciprocal tariffs are even more impactful. By announcing them, Trump effectively disrupted the established rules governing world trade.
For decades, the United States and most other countries adhered to tariff rates set through a series of complex negotiations known as the Uruguay Round. Countries could set their own tariffs, but under the “most favored nation” approach, they couldn’t charge one country more than they charged another. Now, Trump is setting the tariff rates himself, creating “tailor-made trade plans for each and every country on this planet,” according to White House press secretary Karoline Leavitt.
Investor Concerns and Market Reactions
Investors have reacted negatively to Trump’s audacious plan, fearing that it will disrupt trade and damage the global economy. The Liberation Day tariffs, for instance, triggered a four-day rout in global financial markets. In response, Trump blinked, suspending the reciprocal tariffs for 90 days to give countries time to negotiate with his trade team.
Despite the administration’s confidence, the talks turned into a slow process. Countries have their own domestic politics, making it difficult for Trump to secure concessions. He structured the negotiations so that the only U.S. concession is not imposing the tariffs, but countries like South Korea and Japan needed to come back with something to make the agreement look like a win-win.
Dealing with Smaller Economies
Japan, for example, wanted relief from another Trump tariff — 50% levies on steel and aluminum. Countries may also be hesitant to reach a deal with the United States while the Trump administration conducts investigations that might lead to new tariffs on products like pharmaceuticals and semiconductors.
Frustrated by the lack of progress, Trump sent letters to Japan, South Korea, and 12 other countries, warning that he would hit them with tariffs on August 1 if they couldn’t reach an agreement. The levies were close to what he had announced on April 2, with Japan’s expected to be 25%, compared to the 24% unveiled earlier.
Trump signed an agreement last month with the United Kingdom, which reduced U.S. tariffs on British automotive and aerospace products while opening the U.K. market for American beef and ethanol. However, the pact kept the baseline tariff on British products mostly in place, highlighting Trump’s commitment to the 10% tax despite the U.S. running a trade surplus with the U.K.
On July 2, Trump announced a deal with Vietnam. The Vietnamese agreed to let U.S. products into the country duty-free while accepting a 20% tax on their exports to the United States, though the details of the agreement remain undisclosed.
The Broader Implications
The lopsided deal with Vietnam suggests that Trump can successfully use the tariff threat to bully concessions out of smaller economies. Dan McCarthy, a former official with the Office of the U.S. Trade Representative, noted that many smaller countries just want to get out of the situation and are willing to cut their losses. However, wrangling a deal with bigger trading partners is likely to remain more challenging.
“The U.S. is gambling that these countries will ultimately be intimidated and fold,” Reinsch said. “And the countries are gambling that the longer this stretches out, and the longer it goes without Trump producing any more deals, the more desperate he gets; and he lowers his standards. It’s kind of a giant game of chicken.”
