A Dealmaking President’s Opening Moves

Some of Donald J. Trump’s earliest conversations and deals as president-elect signal how he might behave as negotiator-in-chief.

By PON Staffon / Dealmaking

As a lifelong dealmaker, Donald J. Trump will enter the Oval Office with considerable bargaining experience in the business world. But his blank slate as an elected official combined with his fluctuating positions on key issues such as immigration and tax policy throughout the presidential race have left many wondering what kind of negotiator he will be. How will he deploy his business negotiating skills to manage global conflicts, pursue his agenda in Congress, and win the support of the American people? How open will he be to compromise and collaboration, and on which issues and policies will he stand firm?

In his early days as president-elect, Trump engaged in numerous negotiations that suggest he intends to stay in his comfort zone, relying on dealmaking to achieve his goals as much as or more than other means. These negotiations, a few of which we examine here in detail, offer clues about how Trump will reach agreements as president as well as lessons for professional negotiators.

Throwing protocol by the wayside

As part of the peaceful transfer of executive power in the United States, newly elected presidents traditionally rely on State Department briefings to ensure they appropriately follow the intricate protocol involved in taking and returning congratulatory phone calls from heads of state. Calls are carefully vetted and sequenced to convey the importance of key U.S. strategic partnerships. In 2008, for example, president-elect Barack Obama accepted calls from the leaders of the United Kingdom, France, Germany, Israel, Japan, and a few other stalwart partners the second day after his election, then waited until day four to take calls from China and Russia, with whom the United States has more complicated relationships.

By contrast, in the weeks after his election, Trump took calls from world leaders in what appeared to be somewhat random order and without identity verification, a breach of protocol that invited scrutiny and concern. The fact that Trump reportedly spoke to nine world leaders, including the heads of Egypt, Saudi Arabia, and Turkey, before talking to United Kingdom prime minister Theresa May, for example, created anxiety among some European leaders, according to CNN.com, and fueled speculation that the Trump transition team was caught unprepared for his victory.

In another break from tradition, the tone of some of these calls was unusually casual. Rather than inviting May to visit the White House, for example, Trump asked her to let him know if she traveled to the United States. Given the complex web of relationships among the United States, India, and Pakistan, Trump’s reported enthusiastic response to Pakistani prime minister Nawaz Sharif’s invitation to visit his country reportedly left Washington diplomats “slack-jawed,” according to the New York Times. And Trump’s decision to include only his daughter Ivanka Trump, who was negotiating a business deal with a Japanese-government-backed company at the time, in a brief meeting with Japanese prime minister Shinzō Abe stoked criticism that the Trumps were using the presidency to advance their personal financial interests.

The level of protocol to be followed in a negotiation can vary widely from one context to the next, and particularly across cultures. Although it can be tempting to skip the formalities and get down to business, remember that what might seem like meaningless rules to you could be in place for good reasons. Brush them off, and you risk offending your counterpart or signaling your own lack of experience. When negotiating in an unfamiliar environment, study the relevant negotiation protocol and cultural norms well in advance, consulting with more experienced advisers as necessary.

The Taiwan call: Accidental or deliberate?

Overall, diplomats gave Trump the benefit of the doubt regarding his protocol-busting moves—that is, until he took a phone call from the president of Taiwan on December 2.

The call with President Tsai Ing-wen itself was reportedly brief and innocuous; it was the fact that it took place at all that created a stir. For decades, the U.S. government has deferred to the Chinese government’s “One China” principle, which views Taiwan and China as two parts of one sovereign state. In adherence to that principle, no American president or president-elect had spoken directly to the head of Taiwan’s government since 1979.

Given Trump’s previous breaks with protocol, many observers at first suspected he had accepted the call by mistake. Even the Chinese Foreign Ministry, after filing a mild formal complaint with the Obama administration, publicly suggested that Taiwan had played a “petty trick” on Trump, a characterization that seemed designed to let the president-elect off the hook. But rather than allowing the matter to die down, Trump fired off tweets critical of China’s policy on trade and the South China Sea.

As it turned out, the phone call with Trump appeared to have been deliberately orchestrated by Taiwan, the Times reported on December 6. For six months, former senator Bob Dole, a lobbyist whose Washington law firm was employed by Taiwan, coordinated with the Trump campaign and the transition team to set up meetings between Trump’s advisers and officials in Taiwan, Justice Department disclosure documents show. The behind-the-scenes lobbying culminated in a new strategy for engagement with Taiwan at the same time that Trump’s foreign-policy advisers urged him to take a tough opening stance with China.

The news of Dole’s involvement raised eyebrows, given Trump’s campaign promise to “drain the swamp” of political insiders and cronies in Washington. Conceding that his transition team was filled with insiders—“Everyone’s a lobbyist down there,” he told 60 Minutes—Trump made a public promise to gradually phase lobbyists out of his inner circle.

Was the phone call a wise bargaining move? “By showing strength at the beginning, [Trump] may hope to gain advantages in bargaining later with the Chinese on many key issues,” Professor Zhang Baohui of Lingnan University in Hong Kong told the Times. “He is a businessman, and he could bring his business bargaining tactics to interstate relations.” Numerous Republicans hailed Trump’s “improvisational diplomacy” as a refreshing break from stale diplomatic rules, according to the Times.

But breaks with tradition can backfire if not executed with care. “Catching China by surprise on some of the most sensitive and long-standing areas of disagreement . . . presents enormous risks and potential detriment” to the Sino-American relationship, Paul Haenle, a National Security Council staff member under Bush and Obama, told the Washington Post. Indeed, on December 5, the Chinese government warned Trump through a newspaper editorial that it was prepared to escalate the confrontation over Taiwan. Trump then went on to suggest on Fox News that he might use U.S. adherence to the “One China” policy as a bargaining chip in negotiations with China. A Chinese Foreign Ministry spokesperson responded by saying that China’s cooperation with the United States on key issues would be “out of the question” if Trump abandoned the policy. By stirring up conflict with China, Trump risks losing China’s cooperation on North Korea, climate change, and other pressing matters.

In the business world, how can you convince a counterpart to accept new ways of conducting business without endangering the relationship? The Trump team’s plan of opening with a small but significant gesture—the phone call with Taiwan—suggests one potentially effective way of doing so. But because signals sent publicly can easily be misinterpreted and spiral out of control, it’s generally better to meet privately to discuss the relationship and the changes you’d like to make.

Setting a potential precedent

Throughout the presidential campaign, Trump mocked Obama administration negotiations, such as the nuclear agreement with Iran, and vowed to reach much more advantageous deals on behalf of the American people. For months on the campaign trail, for instance, Trump repeatedly promised that, if elected, he would persuade Indiana-based Carrier Corporation to cancel its plans to outsource about 2,000 manufacturing jobs to Mexico, in part by threatening to impose stiff tariffs on Carrier and other U.S. companies that send jobs abroad.

A week or two after the election, as Trump later recounted at a press conference, he was surprised to hear a Carrier employee say on the evening news that he was confident that his and his coworkers’ jobs were safe because Trump had been elected. Trump admitted that at first he thought the man’s comment might have been “sarcastic,” as reported by the Washington Post. His repeated promises to save the Carrier jobs had merely been a “euphemism” for all the American jobs he planned to save in the future, Trump explained.

Nonetheless, motivated by the Carrier employee he’d seen on TV, the president-elect reached out to Greg Hayes, the CEO of Carrier’s parent company, United Technologies Corp., about keeping the jobs in the United States. Next, Trump had his vice-president-elect, Mike Pence, then still the governor of Indiana, negotiate the details. Hanging over the negotiations was the prospect of Trump revoking United Technologies’ $5 to $6 billion in federal contracts or imposing tariffs on its imports.

State officials reportedly promised Carrier a $7 million incentive package in return for keeping the jobs of 800 workers at an Indianapolis furnace plant and making new investments in its plants, which Hayes later told MSNBC would actually lead to further job losses. The company still planned to move 1,300 jobs to Mexico. And it discussed with Pence’s team its desire for a corporate tax overhaul and more favorable regulations, according to the Wall Street Journal.

Senator Bernie Sanders, writing in the Post, noted that the deal fell well short of Trump’s promise to save all the Carrier jobs. Sanders also said the deal created a bad precedent by potentially tempting other corporations to “threaten to offshore jobs in exchange for business-friendly tax benefits and incentives” at taxpayer expense. Other critics noted that the deal would be costly and difficult to replicate and fails to address the root causes of U.S. manufacturing job loss, particularly increasing automation.

For business negotiators, Trump’s Carrier deal most obviously reminds us not to make promises we can’t or don’t intend to keep. Negotiation goals that may seem easy to meet from a comfortable distance are likely to be more complicated at the bargaining table, requiring compromise or costly rewards for compliance (or threats of punishment for noncompliance). In addition, the Carrier agreement points to the importance of looking beyond the negotiation at hand to consider what precedent it might set for future deals. If you are handing out favors, will other parties expect the same treatment? How can you manage others’ expectations going forward?

Both for those elated and those dejected by Trump’s election, his term in office should offer interesting negotiations to analyze. In future issues, we will look at Trump’s negotiations with Congress, how he juggles his business interests, and other deals and conflicts that crop up with an eye toward identifying relevant lessons for professional negotiators.

Some very public advice

When Trump was choosing his cabinet in November, Kellyanne Conway, his former campaign manager and one of his top strategists, wrote on Twitter that she had received a “deluge” of concerns from conservatives about Trump’s consideration of former Massachusetts governor Mitt Romney for the position of secretary of state. She suggested that Romney, who criticized Trump repeatedly during the campaign, would not be loyal enough for the position. Some observers questioned whether Conway was boxing her boss into a corner with her criticisms of Romney. But Trump released a statement saying that Conway had asked his permission to share her thoughts publicly on the secretary of state decision and that he had encouraged her to do so. Conway told the New York Times that when Trump is unsure which path to take, he appreciates when staffers go public with their conflicting opinions. In fact, Trump considers such pronouncements to be demonstrations of his staffers’ loyalty to him, sources told the Times. It’s an approach that many leaders wouldn’t welcome, for fear of having their options limited and their authority undercut in public, but one in keeping with Trump’s penchant for airing his views on Twitter and in the media.