Weaponizing Trade

Oh, My, Greenland...

Greenland is The Current Thing. The Current Thing draws eyeballs, almost always to the exclusion of everything else that’s going on. Sometimes there appear to be Two Current Things, in this case the ICE v Professional-Protestor imbroglio in Minnesota, but everyone is currently fixate on the rhetorical escalation and brinkmanship over a barely populated, ice-covered island that stands athwart North America and some bad actors.

Trump, a real estate guy to his core (buy land because they’re not making any more of it) wants Greenland for the United States.

His reasons are sound. It carries geographic importance. It has resources - resources that the current owner doesn’t appear to have either interest or means to exploit. It is a place that, if invaded or annexed by a hostile power, would pose a substantial threat to America. It is a place whose current owner has shown neither interest nor means to defend against invasion. It is a place that, if invaded, would be left to America to defend. Yeah, yeah, NATO blah blah, but let’s be honest.

His approach?

Ugh.

Trump is doing his typical “art of the deal” schtick - go overboard/outrageous at the open, so as to make the actual “first offer” appear more reasonable.

But, also, not quite.

The President is not a CEO, and the country is not a business. CEOs and businesses have to negotiate rather than coerce. The President of the most powerful country in the world has the power to coerce, and it’s a terribly tempting one as we’ve seen across the nation’s history. Trump obviously doesn’t care about the pitfalls of coercion, because they stand in the way of getting what he wants.

Here I’m not talking about the threat of military force, which Trump has not taken off the table, but which I still believe is more bombast than plan. I’m talking about his favorite coercive tool: tariffs.

Not content with engaging in a trade war with Denmark alone, he’s threatening tariffs on a bunch of Denmark’s neighbors and partners in order to pressure that tiny nation of 6M people to cede or sell that vast Arctic swathe and its 56K mostly Inuit residents to America.

The Supreme Court’s ruling on Learning Resources, Inc. v Trump, which is about a President’s power to unilaterally impose tariffs under the International Emergency Economic Powers Act (IEEPA) cannot come soon enough.

With a caveat.

While the gambling markets point at SCOTUS reining in Trump’s wild-man tariff spree, it’s also possible that the Court decides that he has been granted such power by Congress. If so, the wildness will escalate, and we will suffer.

Why will we suffer?

Because tariffs are stupid. They benefit a few at a greater expense to the whole. They are popular around the world because of that benefit, which inspires rent-seekers to invest in politicians. They are also popular because they feed our tribalistic instincts, which erroneously tell us that protectionism and “keeping/bringing jobs home” is beneficial. Again, protectionism benefits a few at greater expense to the whole. Concentrated benefits outweigh diffuse harm in political calculus, even when the harm far exceeds the benefit.

Trump’s defenders assert that he is using tariffs as a means to a better end, to force other nations to open up their markets and reduce their tariffs. Yes, other nations’ tariffs are harmful to us, but they are also (and more) harmful to themselves. So why emulate their own self-harm, other than in service to some nirvana fallacy? But, even if that weren’t the case, the evidence that Trump’s end game is free trade is simply not there. He’s proud of forcing businesses to repatriate jobs, even if those repatriated jobs cost consumers and the country more. He’s proud of the revenue brought in by tariffs, even if that revenue is ultimately coming out of American consumers’ pockets. In a time when “affordability” is The Current Thing on the electoral front, his penchant for tariffs stands in the way of using that Current Thing for his party’s benefit.

It’s pretty clear he’s not using trade policy as a means to a free-market end.

It’s also pretty clear he’s not using it in a way that benefits the Western global order and its long battle against hostile actors such as China, Russia, and a bevy of Middle Eastern nations.

Weaponizing trade isn’t universally a Bad Thing, however.

Imagine if he turned his focus to weaponizing energy policy in furtherance of the Western global order.

Imagine if the administration took decisive steps to liberate American harvesting of petroleum and natural gas, and to accelerate the resurgence of domestic nuclear power.

Imagine how that would then allow America to greatly expand exports of natural gas, especially to Europe, and liberate more petroleum and gas for the export market by ramped up nuclear power production.

Russia’s stranglehold over Europe would be weakened, and Russia starved of hard currency.

The petro-states in the Middle East would endure greater competition and lose geopolitical leverage as the nations that import energy benefit from more choices.

China’s influence in the West would similarly wane. China has tremendous internal problems that too few are talking about, and a more robust Western world order, anchored by American energy exports (and more free trade, while we’re at it), could accelerate the day of reckoning for China the way the USSR’s efforts to keep up with American military strength accelerated its dissolution.

I don’t expect this from the Orange Man. He is as susceptible to The Current Thing as the rest of us are - though he has also proven so good at multitasking that the chattering classes can’t come close to keeping up. Greenland is the bauble that has captured his eye, and he’s breaking all sorts of conventions in chasing it.

Another caveat - and a reason I abide rather than passing final judgment. It may turn out - and I stress may - that the end game here is to elicit some behavior modification in NATO. He’s already, to my great contentment, gotten the under-spending NATO nations to up their military outlays. Decades of American taxpayers’ funding European welfare states will never be properly repaid, but Europe funding its own defense rather than relying on Uncle Sam’s largess is an unreserved Good Trump. If all this Greenland posturing is about Denmark and the rest of NATO extending their military umbrellas to cover the island, and thus extending some sort of Pax Europa in that direction, also Good.

Do I think this is the actual intent? Not likely. Is it possible? Slightly. Anyone who claims to know what’s in Trump’s mind is an arrogant fool. We can assign likelihoods, but we must always allow for surprises. Unlike some of his predecessors, he isn’t in the habit of showing all his cards.

Trump has taken some positive steps on energy policy. That, combined with other deregulatory efforts, is at the heart of whatever positive economic news we receive, and is IMO what’s offsetting the harm his tariffs are causing. I know he’s not going to break from his tariff obsession of his own volition, which is why I hope the Court gifts him with a slap-down.

Interesting times, indeed.