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Can Trump Deal with North Korea and China?

Summary:
CAMBRIDGE – For years, Americans have misunderstood the nuclear threat from North Korea, misjudging how to address it. They have also misunderstood the bilateral trade deficits with China, overestimating their importance. Today, as President Donald Trump threatens new trade barriers against China, on which the United States must depend to help rein in an increasingly dangerous North Korea, these two issues have become closely connected. Yet US officials seem no closer to figuring them out. The stakes obviously are much higher regarding North Korea, with US-South Korean joint military exercises this week aggravating already-high tensions. If the US and North Korea do get into a military confrontation, there is a real risk that nuclear weapons will be used. Even a

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CAMBRIDGE – For years, Americans have misunderstood the nuclear threat from North Korea, misjudging how to address it. They have also misunderstood the bilateral trade deficits with China, overestimating their importance. Today, as President Donald Trump threatens new trade barriers against China, on which the United States must depend to help rein in an increasingly dangerous North Korea, these two issues have become closely connected. Yet US officials seem no closer to figuring them out.

The stakes obviously are much higher regarding North Korea, with US-South Korean joint military exercises this week aggravating already-high tensions. If the US and North Korea do get into a military confrontation, there is a real risk that nuclear weapons will be used. Even a conventional war would likely be catastrophic.

Trade is relevant to the North Korean nuclear challenge, because strict economic sanctions by China – potentially including a halt in oil supplies – are probably the world’s best bet for stopping the North’s nuclear program (in exchange for certain security guarantees from the US). Trump may well understand this. But he apparently believes that he can use US trade with China as a bargaining chip to secure its help in dealing with North Korea. This is the wrong approach.

Trump’s approach to governance – characterized by an unprecedented lack of interest in rules, principles, alliances, and institutions – is sometimes described as transactional. Justifications of that approach typically focus on Trump’s business background, which supposedly makes him the dealmaker the US needs. In fact, Trump’s behavior reflects a lack of regard for some of the most elementary requirements for successful negotiation.

A skillful negotiator knows that one must look at the game from the other player’s viewpoint, in order to determine which outcomes they may view as favorable, and find common ground. Moreover, concluding a deal requires credibility with respect to both inducements and punishments.

Trump’s attempts at bargaining with China reflect a failure on both fronts. From China’s perspective, a nuclear-armed North Korea is undesirable, but still less problematic than the potential breakdown of order in the country, which could produce an influx of refugees into China and bring American troops closer to China’s border. Against this background, erratic US trade threats are not the way to convince China to apply pressure on its troublesome ally.

Instead, the US, along with South Korea, should promise that, if Chinese-backed sanctions did cause the North Korean regime to collapse, China would not be confronted either by US troops north of the 38th parallel or by a unified, nuclear-armed Korean Peninsula. In the shorter term, the US and South Korea should offer to pause the deployment of America’s Terminal High Altitude Area Defense (THAAD) system in South Korea, if China adopts and enforces additional sanctions on the North.

But credibility on the part of the US president is needed to make this – or any – strategy work. Unfortunately, Trump’s statements – whether about the past, the present, or the future – are often out of touch with reality. On the North Korean nuclear issue alone, he has shown a remarkable lack of consistency, credibility, and follow-through.

Jeffrey Frankel
Jeffrey Frankel, a professor at Harvard University's Kennedy School of Government, previously served as a member of President Bill Clinton’s Council of Economic Advisers. He directs the Program in International Finance and Macroeconomics at the US National Bureau of Economic Research, where he is a member of the Business Cycle Dating Committee, the official US arbiter of recession and recovery.

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