During Trump’s presidency, transactional thinking—the freewheeling pursuit of deals—could become the organizing principle of the administration’s foreign policy, rather than one element of it, as in past administrations. Previously unthinkable bargaining chips—including, apparently, a vulnerable island of 23 million people in the Taiwan Strait—could come into play. The question of what is negotiable, and what isn’t, will be a persistent source of uncertainty. Is America’s commitment to the most peripheral members of the NATO military alliance a tradable asset? What about U.S. security commitments to countries like Japan and South Korea? Developments that initially seem like one thing (a phone call suggesting closer U.S. relations with Taiwan) could turn out to be another (an opening gambit in complex U.S. negotiations with China). Trump and his team may prove to be masterful negotiators on behalf of U.S. interests. Or they may prove to be dangerous or incompetent ones. As Dominic Tierney points out, Trump has so far signaled that he will fulfill Putin’s desires in Syria and Ukraine in exchange for the mere possibility of improved relations with Russia—pretty weak stuff from a guy who claims to drive a hard bargain.
In one sense, Trumpian dealmaking may be less a new form of U.S. foreign policy than a return to an old form—one that Robert Blackwill and Jennifer Harris, former officials in the George W. Bush and Barack Obama administrations, respectively, call “geoeconomics.” They define “geoeconomics” as the “use of economic instruments”—everything from trade, investment, and monetary policy, to foreign aid and cyberattacks against banks—to “accomplish geopolitical objectives.” For much of its history, from the Louisiana Purchase to the Marshall Plan, and especially during the presidency of Trump’s favorite dealmaker, Franklin Roosevelt, the United States prioritized geoeconomics in its foreign policy, Blackwill and Harris argue. But ever since the Cold War, the U.S. government has mainly employed diplomatic and military tools. It regularly imposes economic sanctions on other countries, but rarely takes other geoeconomic measures.
At the same time, other countries, including top U.S. rivals like China and Russia, have embraced geoeconomic carrots and sticks. China, for example, has conditioned economic assistance to countries like Costa Rica on those countries granting it diplomatic recognition over Taiwan. So why are leaders of the United States—still the largest economy in the world, by many measures—so resistant to taking a similar approach? As Blackwill and Harris wrote earlier this year in Foreign Affairs:
Many states now appear entirely comfortable employing economic tools to advance their power, often at the expense of Washington’s. China, for instance, curtails the import of Japanese cars to signal its disapproval of Japan’s security policies. It lets Philippine bananas rot on China’s wharfs to protest Manila’s stance on territorial disputes in the South China Sea. It rewards Taiwanese companies that march to Beijing’s cadence, and punishes those that do not. Russia, meanwhile, bans imports of Moldovan wine as Moldova weighs deeper cooperation with the EU, and Moscow periodically reduces energy supplies to its neighbors during political disagreements. It dangles the prospect of an economic bailout to Cyprus in return for access to its ports and airfields, forcing EU leaders to choose between coming through with a sufficiently attractive bailout of their own and living with a Russian military presence inside the EU.
Many of Trump’s more provocative foreign-policy proposals have been attacked on economic grounds. Critics point out, for instance, that slapping a 45-percent tariff on Chinese imports to the United States could spark a trade war that would damage the U.S. economy as well. But in a talk this spring, Harris and Blackwill noted that geoeconomic actions can’t simply be judged by their economic costs or benefits. Harris cited the scenario of China dumping its massive holdings of U.S. Treasury securities in an effort to punish the United States:
[T]he conventional wisdom goes … [t]his is economically irrational. Therefore, because [China] would take heavy economic losses on the remaining value of whatever they don’t dump, they wouldn’t do it. That’s true if you were looking at the world through the lens of economic rationality, with those interests at the fore.
But if you are [Chinese President] Xi Jinping and the U.S. has escalated tensions around some maritime claims that you feel are first-order to your national security and you are looking for a way to underscore your displeasure with Washington, and you have, say, I don’t know, $2 billion that you want to budget for this, where are you better off putting that $2 billion? In some fraction of your next aircraft carrier installment when the U.S., even after that, will remain hyper-dominant in the military realm? Or might you want to, I don’t know, short the U.S. housing recovery and your holdings of Fannie and Freddie?
So I do think that once you take off the lens of economic rationality and begin to look at it through a geopolitical lens, it’s not so clear.
Blackwill and Harris don’t necessarily support Trump’s brand of geoeconomics. None of their favored geoeconomic policies “threaten our closest allies with termination of our alliance systems on which we have depended since the end of the Second World War for promoting stability around the world,” Blackwill noted, in contrasting his proposals to Trump’s.