The Fire Hose of Chaos: Don't Expect Many Trade Deals

Summary

Highlights

• Trade deals with the US are slow due to bureaucratic and organizational issues. 🕒
• A small team within the US administration is juggling multiple trade negotiations with limited resources. 🤹‍♂️
• Tariff threats made early in negotiations complicate the process and cause distrust among partners. 🌩️
• Canada and Mexico have had mixed experiences with the US trade policies, leading to uncertainty. 🍁
• The Trump administration's approach has caused a split in Western alliances, impacting trade discussions. 🔀
• Countries are hesitant to negotiate with the US due to its changing policies and unreliable commitments. ⚖️

Key Takeaways

• Expect slow progress on trade deals due to organizational and staffing issues in the US government. 🐢
• Trade partners like Canada and Mexico face unclear outcomes, sometimes regardless of their negotiating stances. 🤔
• The Trump administration's tariff policies are causing skepticism and distrust among trade partners, complicating talks. 😳
• Much of the trade negotiation process is snarled due to inadequate staffing and response issues from the US. 📞
• Major changes and challenges in managing trade relationships with countries like Japan, where trust has eroded. 🏯

Overview

Chapters

• 00:00 - 00:30: Introduction to Trade Deals In the chapter "Introduction to Trade Deals," Peter Zion discusses the complexity and lengthy process of negotiating trade deals, particularly from the United States' perspective. He explains that constructing a general position for trade talks involves around six months of consultations with industry and Congress. Even the quickest trade agreement, with Singapore, took 18 months to finalize, highlighting the intricate and time-consuming nature of trade negotiations.
• 00:30 - 01:00: Challenges and Organizational Issues The chapter discusses the complexities and prolonged nature of trade discussions, highlighting how negotiations can span nearly a decade due to numerous factors at play. The Treasury Secretary anticipates that substantial talks will not commence for another five weeks, and initial outcomes won't surface for at least six months, a timeline considered overly optimistic. The chapter further critiques the premature use of tariff threats, a strategy typically employed when talks stall, suggesting it puts everyone at a disadvantage. Additionally, the chapter points to a lack of preparedness on the part of the United States.
• 01:00 - 01:30: Organizational Constraints in US Administration This chapter discusses the organizational changes and constraints in the US administration, particularly during the Trump era. It highlights how the Trump administration entered with a smaller group of key personnel, focusing mainly on the cabinet and a few senior aides. The administration systematically removed senior officials across departments and replaced them predominantly with loyalists, leaving many positions devoid of experienced negotiators, particularly in relation to trade deals. The lack of seasoned personnel impacted the administration's ability to effectively negotiate and manage trade deals.
• 01:30 - 02:00: Limited Capacity in Top Officials The chapter discusses the limited capacity of top officials in the U.S. administration who are capable of handling important talks. Specifically, it identifies four key individuals: Jame Greer at the U.S. Trade Representatives office, Howard Lutnik at Commerce, Scott Bent at Treasury, and the President. However, all of these officials have numerous other responsibilities. Normally, hundreds of people would handle the technical aspects of such discussions. The limited availability of these key figures becomes an issue when another country seeks to engage in talks with the U.S. as per Donald Trump's directives.
• 02:00 - 02:30: Communication Breakdowns In the chapter titled 'Communication Breakdowns', the focus is on the failure of communication within a trade organization. The narrative highlights that only a few individuals at the top are available to manage conversations and negotiations, leaving no subordinate staff to handle ongoing dialogues. This has resulted in a backlog and unresponsiveness, with many trade messages going unanswered. Larger trading partners express frustration over silent treatments from offers made. Despite this, the trade representatives office maintains a different stance on the issue.
• 02:30 - 03:00: Trust Issues in International Trade The chapter delves into the issues of trust in the context of international trade, particularly under the administration of President Donald Trump. It highlights the bureaucratic challenges where officials decide what issues should reach the president amidst his other commitments. A key focus is on the lack of trust in Trump's approach to trade negotiations. The interaction with major trading partners, especially Canada, is discussed, noting Canada's firm stance against Trump's policies.
• 03:00 - 03:30: Canada and Mexico Trade Relations The chapter discusses the trade relations between Canada and Mexico with the United States during the Trump administration. It highlights how both Canada and Mexico faced tariffs imposed by the Trump administration. Although Mexico complied with the administration's demands, it still faced tariffs, similar to Canada. This created uncertainty in the trade approach with the top trading partners of the US. Additionally, European trade relations were affected due to security issues as the US withdrew support for Ukraine, which is in conflict with Russia.
• 03:30 - 04:00: Security Concerns with Europe The chapter discusses the role of NATO in relation to European security concerns, pointing out that NATO was established by the United States to contain Russia. It highlights Europe's perspective of the U.S. as a security threat and describes the Trump administration's approach to security issues, which focuses on arms sales and aligning with U.S. directives. This creates a divide within Western civilization's security identity.
• 04:00 - 05:00: Japan's Disappointment The chapter explores Japan's reaction to the Trump administration's policies, highlighting feelings of betrayal and disgust. It mentions Japan's low profile stance and briefly references the Japanese Prime Minister, Shinszo Abbe, during Trump's first term. The chapter also touches on broader international relations issues involving NATO and European hesitance to engage with Trump's administration, linking it all to the complexity added by tariffs.
• 05:00 - 06:00: Erratic Trade Policies The chapter discusses erratic trade policies between the United States and Japan during Donald Trump's administration. It narrates an incident where a trade deal, painstakingly negotiated and signed by Trump himself, was abruptly nullified by his administration, leaving Japan in a difficult position and damaging trust between the two countries. The Japanese had taken measures to align with the US under the belief of a solid partnership, only to find the deal disregarded, thus portraying the fickleness of Trump's trade policies.

The Fire Hose of Chaos: Don't Expect Many Trade Deals Transcription

• 00:00 - 00:30 Hey all, Peter Zion here. The uh fire hose of chaos continues and today we're going to talk about trade deals and why you really shouldn't expect many. Uh first of all, let's talk about the organizational side of things. Um usually it takes the United States about 6 months of consulting with industry and consulting with Congress just to build its general position on a trade talk. And then you go into talks with the other side. The fastest trade deal the United States has ever negotiated with Singapore took about 18 months. Most of
• 00:30 - 01:00 them take the better part of a decade because there are so many pieces in motion. Um even the Treasury Secretary says that meaningful talks aren't going to begin for another 5 weeks and the first results aren't going to happen with 6 months. Um even that is just a grossly optimistic time frame. I mean, what you normally do is if the trade talks reach a point of stagnation down the road, then you start throwing around the threat of tariffs. By doing it in the front end, everybody's kind of on the wrong foot. And to be perfectly blunt, the United States isn't ready to
• 01:00 - 01:30 have these talks. Uh, part of that is also organizationally. When the Trump administration came in, he came in with a much smaller cadre than most presidents do. It's really just the cabinet and a few senior aids. Uh the Trump administration then proceeded to gut all of the departments of everyone in the top several echelons uh and then never staffed those positions with anyone but loyalists. And so there really aren't a lot of people who even know how to negotiate in the first place, much less do a trade deal. So
• 01:30 - 02:00 there's really only four people in the US administration that are capable of holding the talks. You've got Jame Greer at the US Trade Representatives office. You've got Howard Lutnik at Commerce. You've got Scott Bent at Treasury and then of course the president himself that's four and all of them have other things to do. Normally you would have literally hundreds of people taking care of all the technical aspects of the talks. And so when another country reaches out to the United States to do exactly what Donald Trump says he wants
• 02:00 - 02:30 them to do, open conversations on all of the topics, there are no people at the lower levels to carry on those conversations. It's just the four at the top and all of them are very, very busy doing everything they do with their normal day job on top of several dozen trade negotiations. And so we're hearing reports left, right, and center from even the larger trading partners that uh messages are going unresponded and any offer that they make is just met with silence. Uh for their part, the trade representatives office says that it's
• 02:30 - 03:00 sending the things on to the president that he thinks are worth the president's time, but everything's just snarled up because the president is doing other things. That's kind of piece one. Piece two is much more visceral because of the way Donald Trump has approached these things. Uh there isn't a lot of trust. So consider the situations of our top four trading partners outside of China. So first, Canada. Canada took a hardline position of resisting what the Trump
• 03:00 - 03:30 administration did in its early days and as a result it got slapped with tariffs that haven't come off. Mexico decided to bend and give the Trump administration everything it wanted and as a result it was slapped with tariffs. So with our top two trading partners, no one knows what the approach should be because the result is the same. As for the Europeans, it's a security issue. Trump administration came in basically withdrew support for Ukraine. Ukraine is fighting Russia. Russia is the only
• 03:30 - 04:00 reason that the NATO alliance exists. It was created by the United States to contain the Russians. And so the Europeans quite rightly see the United States as a security threat and anything that happens on the trade front as a subsidiary to that. And the Trump administration doesn't want to talk about the security situation at all unless the Europeans buy lots and lots of weapons but still do everything the United States says. And so we're getting a split in the security identity of the entire Western civilization uh because of this disconnect between the what the
• 04:00 - 04:30 Trump administration says it wants, what it's doing, and then throwing the tariff situation into the mix. And so the Europeans really don't see a benefit to discussing anything with the Trump administration until such time that the NATO situation is untangled. And then finally, you've got Japan. Japan has tried to take a relatively low profile in this and it's mostly one of um it's kind of a combination of betrayal and disgust that they're feeling. During the first Trump administration, Shinszo Abbe, the Japanese prime minister,
• 04:30 - 05:00 specifically came to Washington, cut a humiliating deal specifically to get in with Donald Trump so that whatever the future of the United States would be, whatever the future of Japan would be, the hard work would be done and they could proceed together. So the deal was negotiated by Trump, was signed by Trump, was enforced by Trump. And in the last month, the Trump administration has basically abregated the deal and told the Japanese to start over. And the Japanese position is if you won't honor
• 05:00 - 05:30 your own deals, why in the world should we bend over backwards to negotiate another one with you? And so the official story is that everyone is reaching out to negotiate and lots of good deals are being made. But the bottom line is none of our trade partners really see the point in doing this because everything is so erratic. Today is April 16. Today the Trump administration announced its 95th tariff policy in 45 days, raising the tariff
• 05:30 - 06:00 rate on many Chinese products to 245%. As long as everything is so erratic, there is no point in having a conversation with the United States, even if you can get someone on the phone because the rest of the world just doesn't know yet what this administration actually wants. The goalposts are changing on a daily basis, sometimes an hourly basis. And until that settles, trade talks, real trade talks, can't even begin.