Can "Geopolitical" Tariffs Be Dealt with through Trade Deals?

Last Friday, U.S. Trade Rep. Jamieson Greer was asked about Trump's initial suggestion of tariffs related to the goal of taking over Greenland:

The President just said that he might put tariffs on countries that don't go along with Greenland. And I wonder if that's something that you've been drawing up and working up. Is that going to happen?

And this was Greer's response:

So the President has been quite clear over the past year that we're going to use tariffs effectively to protect jobs here and get wages up here, but he's also going to use it geopolitically. Presidents, for decades, have always used sanctions authorities to address geopolitical matters. Tariffs is just in the long line of tradition of presidents using American geopolitical power to achieve American geopolitical goals. And so I'll continue working with the president whatever he needs to do on that front.

Then on Saturday, Trump put out a Truth Social post making clear that he was serious about these Greenland tariffs, causing quite a commotion, to put it mildly. At this point, I have no idea what's going to happen in this situation, but it raises a broader issue that needs to be addressed: How should trade agreements deal with "geopolitical" tariffs?

At the outset, let me just note that I don't have a definition for "geopolitical" tariffs, and I'm not sure what the full scope is, but it clearly includes tariffs designed to coerce trading partners on matters of foreign policy, as the Greenland tariffs are.

Turning to how trade agreements should deal with these tariffs, for U.S. trading partners who have signed a trade agreement with the U.S., I think it's fair to say that the view is that trade agreements should, generally speaking, prevent these tariffs from being imposed on them. A big reason for signing a trade agreement is to get certainty on tariff levels, and if the U.S. can raise tariff levels above the bound rate for geopolitical reasons, that certainty is lost to some degree and the trade agreement is much less valuable.

For the Trump administration, however, I think the view is that geopolitical and economic issues are separate. For economic reasons, the Trump administration might sign a trade agreement that puts some constraints on tariffs (which, of course, may involving raising them a lot, then slightly lowering them, but still). But even if the agreement means that tariffs won't be imposed above a certain level for economic reasons, the administration's view seems to be that it can still impose higher tariffs for geopolitical reasons. Basically, if the administration sees a security concern, it can choose to use tariffs as the sanctions to address that concern. Along these lines, Greer later suggested that the Europeans should separate the Greenland tariffs from the U.S.-EU trade deal: "If I were the Europeans, I would probably try to silo this off if they can. If they want to make it an issue in the trade deal, that's really up to them and not us."

But the Europeans (and others) don't see these as separate issues. In their view, a trade agreement that constrains tariffs should constrain all tariffs that might be used against them, including ones for geopolitical reasons.

Trade agreements do, of course, have security exceptions, and given all the talk from Trump about "security" in relation to Greenland, presumably one part of the Trump administration's response on how trade agreements should operate in these situations might be that the tariffs are permitted under the security exception. But the European view would almost certainly be that this is an abuse of the security exception, undermining the value of the tariff reductions committed to in the agreement.

With views that are so divergent on this issue, I'm not sure what the short-term holds for trade agreements with the U.S. If it turns out that signing a trade agreement with the U.S. does not help you avoid the wide range of geopolitical tariffs that may come your way these days, will other countries see these trade agreements as worth signing?

As I was finishing up the drafting of this post, the issue came up clearly in an interview Greer did today in Davos (I watched the video live here; I don't see a recording at the moment, but maybe they will post it later). There was a long exchange, so maybe listen to the whole thing, but here is a key part:

Question: I'd like to bring you to the present day where the latest threat of tariffs is not based on an economic argument. The President is threatening to put tariffs on various countries in Europe because they are resisting what he wants, which is Greenland. Do you think that that is the right use of tariffs?

Greer: So I would say that that is an appropriate use of tariffs. ... There's a long history of using tools that are at the nexus of economics and national security. In the United States, we have export controls, we have sanctions, we have prohibitions. We have things we do with Swift, things we do in conjunction with the Europeans, [things] we do on our own. Sometimes countries agree with us, sometimes they don't. And so this falls into that category, right? ... the President clearly has decided he doesn't want to impose full sanctions on countries all the time, but he can use a lesser measure like tariffs to try to also set the scene for whether it's negotiations or other geopolitical outcomes.

...

Question: So let's just look at this from [Europe's] perspective for a second. If there is a trade agreement between two countries, but then tariffs can be imposed for other purposes, then what is the value of this trade agreement? I mean, don't you worry that the negotiations that you are conducting, even if you sign agreements, what is the worthiness of these agreements, if you can have tariffs beyond the agreement?

Greer: I think when you have a trade agreement, and if something happens outside the bounds of that trade agreement, ... countries have a decision to make, and they're going to base it on their domestic politics and what they think they need to do. And part of what I've been discussing this whole time is that trade should be focused on national interests, and that we shouldn't be bound to agreements that tie our hands. And so if the Europeans have decided we're not going to be bound to this, we think it ties our hands, we're going to do something else, that's a European choice. I don't agree with them, right? I think we can compartmentalize. If they feel differently, and that's their national interest, fine, but then they enter into a world where the escalation you're talking about can happen, right? So listen, I'm a realist. I live in a realist world. If the Europeans decide to roll everything together into a trade agreement that, by its terms, was limited to some of the most important issues, that's a sovereign decision for them.