Trump Wields a Tariffs-and-Sanctions Hammer in Risky Strategy

(Bloomberg) -- Donald Trump isn’t the first American president to rely on economic sanctions and tariffs to exert U.S. power, but he’s taking that approach to new heights against allies and adversaries from Turkey to North Korea.

With an unexpected tweet on Friday morning, Trump announced that he was employing tariffs -- normally used to address trade disputes -- to pressure Turkey over its continued detention of an American pastor held since 2016. Turkish markets, already in a tailspin over President Recep Tayyip Erdogan’s economic policies, tumbled further with Trump’s decision to double steel and aluminum tariffs.

The move against Turkey follows Trump’s “maximum pressure” campaign on North Korea, fresh penalties against Russia and his plan to reimpose a raft of sanctions against Iran and anyone who does business with it -- including U.S. allies in Europe.

Economic Might

The result is an administration wielding a tariffs-and-sanctions hammer more liberally and with less regard for the consequences than its predecessors. Analysts say the White House strategy reflects a fundamental belief in using American economic might to force others to change their behavior, an approach that will test past findings that sanctions often fail absent broad global support.

“They are explicitly using tariffs as a sanction,” said Richard Nephew, a senior research scholar at the Center on Global Energy Policy and the author of a new book on sanctions. “All these years, we separated the two. Tariffs were for unfair trading practices, and sanctions were for foreign policy problems. The president via tweet said, to heck with it, we’re going to use tariffs for foreign policy problems.”

U.S. administrations have increasingly relied on sanctions since the 1990s to prod countries over everything from human rights violations to sponsoring terrorism, and their use swelled under President Barack Obama. But Trump increasingly relies on them in almost every foreign policy challenge he faces, and some analysts say he isn’t backing up the penalties with a deft diplomatic approach.

“This administration has continued to be strong and nuanced in its application of sanctions,” said David Mortlock, a former director of international economic affairs on Obama’s National Security Council. “What’s different is the use of sanctions as the only tool without a broad diplomatic push.”

Yet the administration -- particularly Trump and his son-in-law Jared Kushner -- have credited their “maximum pressure” campaign aimed at North Korea’s economy for bringing Kim Jong Un to the negotiating table and believe that in a case such as Iran the same can be done to compel its rivals to make a deal.

Mohammad Javad Zarif, Iran’s foreign minister, rejected that view in a tweet on Aug. 11, saying “The US has to rehabilitate its addiction to sanctions & bullying or entire world will unite—beyond verbal condemnations—to force it to.” Referring to Trump’s “shameful” new tariffs on Turkey, Zarif said, “We’ve stood with neighbors before, and will again now.”

The faith that sanctions will achieve foreign-policy aims is rooted in the administration’s broader protectionist approach, according to Fred Bergsten, the founding director of the Peterson Institute for International Economics. He said Trump believes that trade barriers are good policy -- having imposed or threatened tariffs against major trading partners such as Canada, China and the European Union. And Trump’s “America First” approach is tied to his distaste for further committing U.S. military forces abroad, Bergsten said.

“We’re seeing by far the most extensive application of trade controls both for protectionist reasons and in specific cases, be it Iran or Turkey,” Bergsten said. “It’s all part of a common mindset that these trade barriers are effective expressions of U.S. power to pursue.”

Gauging the effectiveness of sanctions has spawned entire fields of study and produced endless policy papers. According to the Peterson Institute, which has studied every global sanctions action going back to at least 1914, the tool is effective 20 to 25 percent of the time. They’re particularly ineffective when aimed at getting a country to give up its “cardinal objective,” such as the nuclear program that North Korea considers essential to its national security.

Russia may be another case in point. In Senate testimony last month, Secretary of State Michael Pompeo said the Trump administration has deployed sanctions on 213 Russian “entities and individuals,” and yet none of those seem to have swayed Russian behavior. Sanctions imposed over Russia’s decision to invade Ukraine in 2014 similarly have brought that crisis no closer to resolution.

“Russia has repeatedly warned that talking to us from a position of strength and in the language of ultimatums is futile and pointless,” Foreign Ministry spokeswoman Maria Zakharova said Friday of sanctions imposed last week for allegedly using a nerve agent against a former spy living in the U.K. “We will consider counter measures to this most recent unfriendly move by Washington.”

Evangelical Paster

Friday’s decision to impose tariffs on Turkey followed sanctions earlier this month on the country’s justice and interior ministers for refusing to release Andrew Brunson, an evangelical pastor whose plight has been championed by Vice President Mike Pence. While the two ministers aren’t believed to have any assets in the U.S., the sanctions -- announced by Pence -- were seen as a sudden and specific way to pressure the country even though it’s a NATO ally that hosts a key military base used in the fight against Islamic State.

“This is not how sanctions have generally been used historically,” Daniel Tannenbaum, a former Treasury official and principal at PricewaterhouseCoopers LLP, said on Bloomberg Television.

For the time being, the administration seems unlikely to pursue a different course when faced with foreign policy crises. Senators are pursuing legislation that would impose still more sanctions on Russia, and officials are weighing new sanctions on Myanmar over abuses against the Rohingya minority.

“Sanctions are an arm’s-length tool -- it’s a way to project power and take advantage of our unique strengths without sending troops oversea or getting too deeply involved with situations outside our borders,” said Michael Singh, managing director of the Washington Institute for Near East Policy and a former senior director for Middle East affairs under President George W. Bush. “It fits the zeitgeist.”

--With assistance from Margaret Talev.

To contact the reporter on this story: Nick Wadhams in Washington at nwadhams@bloomberg.net

To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net, Larry Liebert

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