Trump: The golden rule of negotiation and success: those who have gold set the rules.

Trump: The golden rule of negotiation and success: those who have gold set the rules.

In the realm of global trade, the Trump administration's approach has been a subject of both criticism and curiosity. The administration's trade policies, spearheaded by Peter Navarro and his doctrine of trade imbalances, have been questioned for their effectiveness and methodology. However, a closer examination reveals a strategy that, while not without flaws, holds potential for success.

The Navarro Doctrine and Its Critics

Navarro's doctrine posits that the US is being cheated by countries with which it has a trade deficit. This view argues that all such imbalances reflect the use of tariffs and non-tariff barriers to trade. The doctrine suggests that countries must spend their proceeds on US goods to redeem themselves, a stance that ignores the multitude of factors driving trade, such as resource endowments, income levels, and consumer preferences [1].

Critics argue that this approach is flawed, as it relies on bilateral deficits that do not proxy trade barriers. The administration's calculations for the "Liberation Day" tariffs, which were based on bilateral deficits, resulted in punitive barriers that shocked global markets and governments [1].

The Strategy: Bilateral Reciprocity

Despite the criticism, there is a kernel of wisdom in the administration's approach: the principle of reciprocity. This principle aligns with the public's view that trade needs to be fair as well as free. The US could conditionally offer zero tariffs on imports from countries that extend the same policy to US exports, a strategy that could address non-tariff barriers such as subsidies, currency policy, and trade-related regulations [1].

However, implementing this strategy is complex. It requires addressing non-tariff barriers and understanding that the US itself is a proud exponent of such barriers. The administration would need to engage in long and complex negotiations to make progress where possible, while also recognizing that not everything is a non-tariff barrier, such as value-added taxes [1].

Mutual Recognition and Fair Trade

Another key principle is mutual recognition, which can facilitate fair trade by allowing for the recognition of product-safety certifications across borders. This approach can increase trade while addressing the complexity of non-tariff barriers [1].

A Path Forward

To navigate this strategy effectively, the administration would need to abandon the Navarro Doctrine and focus on bilateral reciprocity. This pivot would require shifting the emphasis from less trade to fair trade, from raising US tariffs to lowering others' barriers, and from demanding submission to celebrating partnership.

Critics of the administration's strategy would be wise to contain their derision and recognize that this approach, while flawed, holds potential for success. By focusing on fair trade through bilateral reciprocity, the administration could achieve a result that no other president would have achieved, potentially calling it a success [1].

References:

[1] https://m.economictimes.com/news/international/global-trends/is-trumps-trade-approach-working-find-out-the-surprising-strategy-behind-his-tariffs/articleshow/120277591.cms