NATO’s shocked members are raising defence spending. Stockmarket investors are now buying into his escalate-then-mediate logic. Remarkably, the S&P 500 index has more than recouped its losses since his “Liberation Day” tariff bomb exploded on April 2.
The problem is that after stoking crises, Trump is seldom skilful enough to solve them. The deals he has notched up are narrow. His truce with China covers tariffs on goods, but the trade war encompasses a far larger range of issues. A trade deal with Britain on May 8 was similarly thin. Details of the Houthi truce are murky, but it may cover only American ships, which account for a tiny share of container traffic heading through Houthi-menaced waters to the Suez Canal.
The Iran talks reportedly address nuclear enrichment but not missile technology or Iran’s support for militias abroad. So they appear no more expansive than the Obama-era deal that Trump scrapped in 2018. Any lasting peace in Ukraine would require muscular deterrence of Russia for years to come; Trump ignores this obvious truth.
His deals may also prove transient because fundamental disagreements are unresolved. He is often willing to broker talks, rarely to act as a guarantor or enforcer. The Gaza truce reached in January, in part thanks to Trump’s envoy, Steve Witkoff, lasted only 58 days. The Houthis carried on launching missile attacks on Israel. The China truce is for 90 days. The US-Ukraine proposal to Russia is for a 30-day ceasefire. Trump’s clumsy negotiating is storing up trouble ahead. By bowing too easily to Pakistan’s demands after its nuclear sabre-rattling and ignoring its tolerance of terrorism, America has created an incentive for India’s military to strike harder, faster next time. After backing down on his trade war, Trump mumbled about an opportunity for “unification” with China, a remark the administration retracted but which spooked Taiwan.
Trump’s limits as a dealmaker have long-term consequences. One is to embed a risk premium into economic decision-making, discouraging investment. Stockmarkets have bounced back, but the dollar has not, as investors worry about America’s reliability. The shipping market expects a temporary reprieve on China-US trade and more disruption of the Suez Canal, not a return to normal.
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Those same doubts affect diplomacy. The world leaders who flatter Trump in public are quietly making plans to be let down by him. His tactic of “escalate, then negotiate” will have diminishing returns as other countries conclude America is bluffing. Some of his dealmaking will succeed, but at the expense of fomenting broad and long-lasting instability. America and the world deserve a better deal than that.
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