Donald Trump has been boasting about his trade deals with Japan and Korea, where in exchange for buying down the taxes on their imports from 25 percent to 15 percent, they will give him $550 billion and $350 billion, respectively, to invest as he pleases. The nature of these commitments is not yet clear, but if they are anywhere close to the way Trump describes them, the countries would be ungodly stupid to take the deal.

A little arithmetic makes this point clear. Last year Japan exported $148 billion of goods to the United States. Let’s say the 15 percent tax reduces its exports by 5 percent; that brings its exports down to roughly $140 billion, or 3.5 percent of Japan’s GDP. (Standard calculations of the response of imports to tariffs on a country’s exports are not very useful since Trump is simultaneously imposing tariffs on most imports.) 

Suppose the additional 10 percentage point tax reduces Japan’s exports to the US by another 10 percent. This would be a reduction of $14 billion. or a bit more than 0.3 percent of Japan’s GDP. 

In effect, Trump is asking Japan to hand him $550 billion to protect $14 billion in annual exports. That doesn’t sound like an especially good deal. 

But wait, it gets worse. Trump does not feel bound by any of his deals. He can easily come back and demand more money from Japan next year, the year after, or at some point in his third time. As his business associates have learned the hard way, deals mean nothing to Donald Trump.

Doing the same math for South Korea, it exported $132 billion of goods to the United States last year, approximately 7.3 percent of its GDP. If the 15 percent tax reduces its exports by 5 percent, it would bring them down to $125 billion. A further 10 percent reduction from Trump’s 25 percent tax would be $12.5 billion, or 0.7 percent of its GDP. To protect, this $12.5 billion in exports Trump is demanding that South Korea pay him $350 billion.

It’s difficult to understand why any country would ever enter into this sort of deal with anyone, especially Donald Trump. They can take one-twentieth the sums being demanded by Trump and use the money to support workers and businesses hurt by the lost exports and come out way ahead. They also would not have to worry about Trump getting upset over some idiocy he thinks up or a right-wing influencer suggests to him.

There is an argument that they may look to strike a deal to maintain military support from the United States against China. This would be an even more foolish strategy. These countries’ leaders would have to be crazy to count on Trump to protect them against military action from China. Is there something about “America First” they don’t understand?

There is an argument that European nations could be looking this way with the idea they could buy some time. Their collective GDP is more than five times as large as Russia’s. With a little time, surely they could build up and coordinate their militaries to ensure they can amply protect themselves against Russia.

The same is not true with South Korea and Japan. Even combined with Taiwan, their economies are less than one-third the size of China’s. Furthermore, China’s economy is growing far more rapidly. They cannot plausibly hope to match the power of China’s military. Given that reality, there is not much of a buying time story for these countries. They will likely have to reach some accommodation with China, since they can’t match its military and certainly cannot count on the United States for its support.

In short, the question the leaders of these countries face is whether they feel like handing Donald Trump hundreds of billions of dollars for nothing. They may think this makes sense, but it is hard to see how.

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