Negotiation in the news: In U.S.-China trade dispute, mixed signals abound

Pitting rival advisers against each other, President Trump has struggled to keep healthy debate from descending into team conflict and confusion.

By on / International Negotiation

During the 2016 presidential campaign, Donald Trump repeatedly asserted that if he were elected, eliminating the U.S. trade deficit with China would be a top priority. “We can’t continue to allow China to rape our country, and that’s what they’re doing,” he said at a campaign rally in 2015. “It’s the greatest theft in the history of the world.”

After Trump won the election, the Chinese government took his measure and concluded that his anti-China rhetoric on the campaign trail had been mere showmanship. Trump was a pragmatic, transactional businessman, they calculated, someone with whom they could negotiate. “His family-run business empire looked familiar in a region where family conglomerates were common,” the Wall Street Journal writes. And former U.S. secretary of state Henry Kissinger, who advised president-elect Trump on China, assured Chinese officials that the new president was willing to put “everything” on the negotiating table.

That assessment turned out to be far too simplistic and optimistic, China learned over the next two years. With Trump apparently torn between his instincts as a businessman and a politician, he’s been alternately swayed by opposing factions in his administration: pro-business moderates and America-first trade hawks. The resulting roller-coaster ride, summarized in a recent article in the Journal, attests to the value of striving for team cohesion even as we solicit opposing views.

With Trump apparently torn between his instincts as a businessman and apolitician, he’s been alternately swayed by opposing factions in his administration: pro-business moderates and America-first trade hawks.

A changing of the guard

At the new president’s Mar-a-Lago resort in Florida in April 2017, Trump and China’s president, Xi Jinping, agreed on a 100-day plan to reduce economic tensions between their countries. In the negotiations that followed between Wang Yang, one of China’s four vice premiers, and U.S. commerce secretary Wilbur Ross, China promised to work harder to reduce its steel production to allow American steel to rebound. But when Ross presented the draft deal at the White House, Trump said it hadn’t gone far enough and called off the negotiation, according to the Journal.

For a new round of trade talks scheduled for November 2017 in Beijing, Trump replaced Ross with a new lead negotiator, U.S. trade representative Robert Lighthizer, more of a hard-liner on trade. Lighthizer persuaded Trump to reject a new concession from China—greater access to the nation’s financial sectors for foreign firms—as too little, too late. “They’re playing you,” Lighthizer told the president, sources told the Journal.

Carrots and sticks

After Trump began threatening to levy major tariffs on China, U.S. treasury secretary Steven Mnuchin set up a new round of trade talks in Beijing for May 2018, despite objections from Lighthizer. Trump appointed Mnuchin to head the delegation but put Lighthizer on the team.

The budding rivalry between Mnuchin and Lighthizer was rooted in their differing views on how to lessen the trade imbalance with China. Lighthizer reportedly viewed tariffs as a useful stick for punishing China for its past trade policy and motivating change. Former Goldman Sachs Group executive Mnuchin, meanwhile, preferred to use negotiation as a carrot to spur concessions. At different times, both approaches—escalation and diplomacy— appealed to Trump. Over the next year and a half, however, it was Lighthizer’s views that repeatedly won out, even as Chinese officials continued trying to reach Trump through Mnuchin, the Journal reports.

Conflict in the ranks

On the first day of the Beijing talks, Lighthizer presented tough new U.S. demands, including calling on China to reduce its $375 billion trade surplus with the United States by $200 billion within two years, according to the Journal. The next day, in earshot of Chinese officials, White House adviser Peter Navarro, another U.S. hard-liner on trade, angrily accused Mnuchin of attempting a power grab by setting up a private negotiating session with Chinese vice premier Liu He.

In subsequent meetings, when the Chinese asked Lighthizer for his input, he reportedly often replied, “I have nothing to say.” Both Chinese and American representatives concluded he had been sent to the talks to police Mnuchin.

The return of Tariff Man

After the White House announced a new round of tariffs on Chinese imports, China canceled a planned negotiation between Liu and Mnuchin in Washington, D.C. The Chinese government hoped Trump would back down on tariffs if the Republicans fared poorly in the midterm elections, but when his party held on to the Senate, the president declared victory.

In the lead-up to G20 meetings in Buenos Aires, Argentina, in late 2018, Trump “veered from optimism to wariness about a deal, sometimes in the course of a single statement,” according to the New York Times. Mnuchin continued to promote compromise, while hawks such as Navarro urged Trump to “double down” on tariffs, the Timesreports. Moderates tried unsuccessfully to keep Navarro from taking the trip.

Over a steak dinner with their teams in Buenos Aires on December 1, Trump and Chinese president Xi Jinping reached a deal to freeze tariffs and agreed to another round of talks to resolve their differences. That night, the business moderates won. Three days later, Trump tweeted: “President Xi and I want this deal to happen, and it probably will. But if not remember, I am a Tariff Man.” Stocks plunged in response.

Leading complex negotiations

These lessons from the U.S.-China trade dispute can be applied to any intricate negotiation or conflict-resolution effort:

  • Seek diverse opinions—and then draw your own conclusions. When setting strategy for an important negotiation or conflict-resolution effort, it can be valuable to seek a variety of viewpoints. At a certain point, however, you’ll need to sift through the facts and opinions, and craft a unified approach. Although both carrots and sticks can be effective, veering repeatedly between cooperation and punishment stands in the way of trust building and progress.
  • Promote team cohesion. If the other team detects chaos and conflict within your ranks, or a poorly disguised good cop/bad cop tactic, they are liable to take advantage. To get your team on the same page, spend ample time preparing to negotiate. Negotiate key roles, discuss substance, and confront any rivalries or differences of opinion that emerge head-on. When disagreements arise during talks, work them through privately.
  • Size up the other side. Don’t take the other team’s apparent chain of command at face value. A team’s spokesperson may not be the one who has the CEO’s ear back at the office, for example. Size up and research individual negotiators’ areas of expertise, perspectives, and influence in their organization. Rather than treating surprising behavior as an anomaly, continually update your assessments. Strive to make inroads with those who appear to have the most sway with top leaders.

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