Trump's Trade Wars - How Not to Make a Deal

Pres. Trump started a trade war with the world, and chaos followed. Let’s look at how he is negotiating and making these decisions. I believe lessons from this moment can guide us as we work through the challenges our companies will face dealing with the tariffs.

Trump’s book, Art of the Deal, tells stories of his putting together intractable business deals where he went outside normal business practice boundaries. His TV show, The Apprentice, had contestants compete for a position running one of his company’s business units. “You are fired!” was Trump’s on-air message to the loser. Pres. Trump has broken from past trade and diplomatic practices and made important world economic negotiations into a public spectacle.

Trade Barriers to U.S. Products Is an Issue

For decades, the U.S. accepted trade barriers and tariffs other countries placed on its products while keeping barriers to products coming into the U.S. low. Japan blocks U.S. rice from its markets, while the U.S. has low tariffs on Japanese cars. Germany puts high tariffs on U.S. cars, while the U.S. has low tariffs on German cars.

The U.S. has a services trade surplus in the world market, but it is much smaller than the goods deficit. And, U.S. consumers have benefited from access to non-U.S. products. Competition from non-U.S. auto manufacturers, particularly Japanese, drove up the quality of autos manufactured in the U.S. 

China restricts U.S. products from entering its markets and demands that U.S. companies surrender IP in order to operate in China. China is a special case because it is a military threat to the U.S. and currently supplies many products and raw materials important for the U.S. economy and military.

Yes, the time has come to end or reduce the trade barriers to U.S. products. Is President Trump’s approach to negotiations and decision making the best way to get the deal he wants? I don’t believe it is.

Making Difficult Decisions Is Hard to Do

Making difficult decisions is – well, getting it right is hard. The tariff wars will force many company leaders to make decisions that profoundly change the direction of their company at a moment of great uncertainty. Getting it right will be hard to do.

My new book, Create the Future, is about how to make difficult decisions when you must get it right. If you have not gotten this essential guidebook for yourself and your leadership team, you can order it from Amazon HERE.

We are witnessing global economic and political theater in which the future financial viability of major industries and whole countries will be decided. Pres. Trump is forcing countries to come to the table and make a deal or face high tariffs on their products coming into the U.S. “If you don’t make a deal I like, you are fired!” The public threats and counter threats are debated through the media.

I don’t know how this will play out, but I believe we can use this moment as a learning opportunity. If tariffs are changed significantly, you will face difficult negotiations with your suppliers and must make decisions about how to structure your supply chains and business models. Let’s look at Trump’s approach to negotiations and decision making for what works and what does not work.

A Story About Negotiations and Making Difficult Decisions

When I talk to business groups about how to make difficult decisions, I start by relating how Pres. Kennedy dealt with the two international crises that dominated his early presidency – the Bay of Pigs Invasion of Cuba and the Cuban Missile Crisis. A few months after Kennedy came into office, the CIA asked him to approve a plan to support Cuban exiles who would land in Cuba and overthrow Fidel Castro. Pres. Kennedy approved the plan without significantly examining whether it was a good idea or feasible. It failed, and the exiles were captured in Cuba.

A year later, the U.S. discovered that the USSR (Russia) was installing nuclear missiles in Cuba that could strike the U.S. Pres. Kennedy learned from the Bay of Pigs fiasco not to take recommendations from experts and advocates at face value.

He formed a counsel of trusted advisors to help him understand the challenge and develop realistic options for a U.S. response. He put some distance between himself and the council and gave its members permission to be creative and to challenge each other and his own thinking. He also created lines of communication with Soviet Premier Nikita Khrushchev outside of official channels.

Kennedy made public statements describing the challenge facing the US and U.S. intentions. He did not negotiate with the USSR through his public statements. The negotiations with Khrushchev were private and through intermediaries. Pres. Kennedy did not demand that Premier Khrushchev come to Washington to negotiate a deal.

Pres. Kennedy took responsibility for his bad Bay of Pigs decisions. He learned negotiation principles and decision making from that experience. He used those tools during the Cuban Missile Crisis to get the Soviet missiles removed from Cuba and prevent nuclear war.

Pres. Trump’s Leadership – Negotiations and Decision Making

Pres. Trump has learned and changed as a leader from his first term. Getting people around him who support his policies is a major change from the first term. He also seems to be okay with different points of view in his inner circle. Elon Musk and Peter Navarro have very different views on trade policy. Trump talks about listening to other points of view before deciding what to do. If he is doing that, he will make better decisions.

Pres. Trump talks about problem solving and decision making in personal terms. He talks about his personal relationships with Russia’s Pres. Putin and China’s President Xi. He wants to be personally involved in trade negotiations with Japan and Germany. He sees the path to solving important issues between the U.S. and these countries as personal negotiations between himself and their leaders.

By putting himself in the center of the trade negotiations, he turns every change to U.S. tariffs into a personal decision. When the U.S. said it would pause tariffs for a 90-day negotiation period, the media portrayed the change as, “Trump blinks and backs down.” By personally communicating specific US tariffs and changes to the tariffs, he makes these U.S. negotiation statements into his personal statements. He takes away his room to maneuver in negotiations with 130 countries.

Yes, there are times when you need to talk directly to the head of the company with whom you are negotiating. “Here is what I am trying to accomplish. Tell me what you need, and let’s find the common ground.” However, negotiating through intermediaries or someone who is not the ultimate decision maker gives the decision makers on both sides space to learn about the other party, try different approaches, and change their position.

Negotiation and Decision Making – Smart Steps to Get It Right

• Don’t make it about you. You are not the company.
• Bring together a small team of trusted advisors to help you understand the issues and develop realistic options.
• Let your representative or intermediary be the messenger with the other side. Give yourself space to maneuver.
• Get clear about the opportunity or the threat.
• Spell out what success would look like.
• Create several options for achieving the success you imagine.
• Spell out the barriers to getting to success. What must go right, and what might go wrong?
• Settle on a deal and choose the path forward that best reflects your goals, risk preferences, and values.

Create the Future is your guidebook for taking your team and yourself through this process.

April Showers Bring May Flowers

April in New England has been cold and wet. I think of walking in my neighborhood as an act of personal fortitude. I get exercise walking in spite of the cold, wind, and wet. But this is the time when trees start to blossom, and flowers burst from winter hibernation. Here is a gift I received on a spring walk.