Experts: Announced Deals Are Fragile

Wendy Cutler, a career USTR employee before joining the Asia Society Policy Institute, said, "In deals, we’ve seen the goal posts move." She said members of the Cabinet would agree to what foreign trade ministers were offering, but then say they needed to bring the deal back to Donald Trump.

The president would then either add more requests, or "say that deal isn’t good enough," Cutler said on an Aug. 5 webinar hosted by the Center for a New American Security.

Cutler said this was very different from during her 30 years at USTR. She said, then, the USTR would call the president as negotiations were going on, if there was a particularly sensitive issue, but the USTR could represent the American position.

"Why put everything on the table right now, if indeed, you’re going to be asked to do more when you go to the White House," she asked, speaking from the perspective of foreign negotiators.

Meredith Lilly, a Carleton University professor who focuses on North American trade relations, and a former trade adviser to Canadian Prime Minister Stephen Harper, said Canadian officials now "didn't feel like American negotiators in the game were negotiating in good faith."

Part of that's rooted in Canadian skepticism that its residents smuggle fentanyl to the U.S. in quantities that make Canada a major contributor to the problem, she said. She also said that they believe that the U.S. wasn't looking for outcomes that would be "good for both sides."

Cutler said that has been by design. She said that the U.S. is looking for deals where they win, and the other country loses, in terms of market access.

"Inning one, I think the U.S. did pretty well," in not making concessions, getting market access opening, and avoiding most retaliation, she said.

Similarly, CNAS Energy, Economics and Security Program Director Emily Kilcrease said, "If you’re sitting in the Trump White House, you’re probably thinking you’re winning the trade wars. I would expect more of the same. I think they think the strategy is working."

However, even if you see higher tariffs in the U.S. as a win, these wins may be fleeting, Cutler said.

"I think these deals are really fragile," she said. She was struck by the fact that the Japanese trade minister, when he returned home, said he didn't want to put it in writing.

"I think I understand why," she said. She said in a normal trade deal, when you get to the writing down phase, you realize you might not have been on the same page with some issues.

But in these deals, "there may be a real gap between folks’ understandings of just fundamental provisions of the agreement," she said.

In the case of investment funds from Japan and Korea, she said, "When you hear the administration describe it, Japan will give $550 billion in cash," and the "White House will dole it out."

But, she said, from Japan, you hear the intent is some joint ventures, some loan guarantees, and $550 billion is a ceiling, not a pledge.

"If there’s really no agreement on what you supposedly agreed, then, the fragility of these agreements is going to be even more stark," she said.

Kilcrease said she doubts the U.S. will promise that the rates announced now can't be raised. That's something the EU expects (see 2508050050).

"If you do something the Trump administration doesn’t like, will they jack up the tariffs again? That’s a real question," Kilcrease said. She said so far, both ticks up in inflation and the litigation over the legality of the tool Trump used have not restrained the administration.

In response to a question from International Trade Today, Lilly said Canada has some room to wait, because 95% of its exports outside the national security tariffs are avoiding the 35% tariff, due to qualifying for USMCA.

She said Canada also doesn't feel an urgency to get the U.S. to drop its 50% tariffs on its aluminum exports, because that tariff "really is hurting U.S. firms," as they have no choice but to import primary aluminum, since there are no sufficient domestic supplies. The Canadian aluminum sector is not damaged, as a result.

However, she said, the "50% on steel, that really is biting."

And, she said, it's not as if Canada feels it can just walk away from the table because the U.S. is trying to cripple its auto, metals and lumber production.

She said there's a "genuine concern" that the USMCA carve-out could end if the U.S. feels Canada isn't open to negotiating.

"We are stuck a little bit between a rock and a hard place," she said. "It’s causing a lot of problems domestically," as some sectors worry they could be sacrificed to save the export market for others.

She said she's optimistic the carve-out will continue, because, with global tariffs, that avenue for importing goods duty-free is "more important than ever" for American firms.