The Long Game

One-Time vs. Multi-Round Negotiations

Over the past three posts, I've shared insights on negotiation fundamentals: understanding your BATNA, applying Fisher and Ury's four principles of effective negotiation, and harnessing the power of conviction. Today, I want to explore a critical distinction that fundamentally changes how we should approach different negotiation contexts: the difference between one-time and multi-round negotiations.

This difference is particularly relevant when examining international trade relationships, which by their nature involve repeated interactions over many years or even decades. The strategies that work in a single transaction might backfire spectacularly when applied to ongoing relationships. As we examine Trump's trade approach, this distinction becomes especially important.

The One-Time Deal: Maximizing Your Outcome

Let's start with simple transactional negotiations. When haggling for a souvenir in a street market during your vacation, the stakes are relatively low, and you'll likely never see the vendor again. In this scenario, aggressive negotiation tactics have few long-term consequences. If you walk away without buying, or if you drive such a hard bargain that the seller makes almost no profit, it doesn't matter much -- you're not coming back tomorrow.

In one-time negotiations, your BATNA is your primary source of power. If you can credibly threaten to walk away, you gain leverage. Tactics like anchoring with an extreme initial offer, feigning disinterest, or creating artificial deadlines can be effective because the relationship doesn't matter beyond this single transaction.

The goal in one-time negotiations is straightforward: maximize your outcome in this specific exchange. The future doesn't factor into your calculus because there is no future with this counterparty.

Multi-Round Games: The Shadow of the Future

World trade negotiations, by contrast, are repetitive multi-round games. Nations expect to deal with each other continuously for the indefinite future. This creates what game theorists call "the shadow of the future" -- the way future interactions influence current behavior.

In multi-round negotiations, your counterparty will remember how you behaved previously and adjust their approach accordingly. Threats and tactics that hurt the counterparty might work in the short term, but those counterparties will invest in ways to protect themselves from those threats in the future.

For the foreign nations dealing with the US, this might mean increasing trade with partners that are more trustworthy, developing more resilience in their own markets, or forming new alliances that exclude the US. These strategic responses could ultimately reduce US leverage in future negotiations.

The classic example of this dynamic is the "Prisoner's Dilemma" in game theory. When played once, the rational strategy is to defect (act selfishly). But when played repeatedly, cooperative strategies often emerge as more successful. Players learn that betraying the other player today leads to retaliation tomorrow.

Trump's Approach: Short-Term Tactics in a Long-Term Game?

Many negotiations experts criticize the use of threats, chaos, and the type of negotiating that Trump has employed precisely because international trade is a multi-round game. Traditional diplomatic approaches have typically emphasized relationship-building, trust, and creating frameworks that can withstand political changes in participating countries.

Trump's more transactional approach -- using tariffs as leverage, making public threats, personalizing negotiations, and emphasizing bilateral rather than multilateral deals -- seems to treat international trade more like a one-time negotiation. His background in real estate deals, where relationships sometimes matter less than the specific terms of a transaction, might inform this perspective.

The key question is whether this approach creates more value for the US in the long run than it sacrifices. Every negotiation involves both claiming value (getting a larger share of the existing pie) and creating value (making the pie bigger). Aggressive tactics might help claim more value in the short term but could impede value creation over time.

Strategic Responses: How Counterparties Adapt

When a counterparty faces aggressive negotiation tactics in a multi-round context, they typically respond in one of three ways:

1. Compliance -- They may concede to demands in the short term to avoid immediate pain, especially if they lack leverage.
2. Retaliation -- They might respond with their own aggressive measures, potentially creating cycles of escalation that harm both parties.
3. Adaptation -- Most importantly, they will make strategic changes to reduce their vulnerability in future rounds.

It's this third response that creates the most significant long-term implications. Here are some ways foreign nations might adapt to reduce their dependence on the US market:

Diversification of Trade Partners

Nations targeted by US tariffs are already accelerating efforts to diversify their trade relationships. China has increased its commercial engagement with Europe, Africa, and Latin America. The EU has pursued trade agreements with Canada, Japan, and Mercosur countries. This diversification reduces the leverage the US can exert in future negotiations.

Regional Integration

We're seeing increased interest in regional trade blocs that can provide some insulation from US policy shifts. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which proceeded without the US after its withdrawal from the TPP, is one example. These arrangements create alternative markets and supply chains that don't depend on US participation.

Domestic Market Development

Countries may accelerate efforts to develop their domestic markets, reducing reliance on exports to the US. China's "dual circulation" strategy, which emphasizes both international trade and domestic consumption, exemplifies this approach. Over time, this reduces the impact of US tariffs or market access restrictions.

Strategic Sector Investment

Nations may invest heavily in sectors where they currently depend on US products or technologies, seeking to develop indigenous alternatives. This is particularly evident in high-tech fields, where concerns about supply chain security have prompted significant investment in domestic production capacity.

The Long Game: Assessing Trump's Trade Strategy

So how should we evaluate Trump's approach to trade negotiations? The answer depends partly on the timeframe we consider.

In the short term, the approach has yielded some concrete results. The USMCA updated NAFTA, the "Phase One" deal with China included commitments to increase purchases of US goods, and the US-Japan trade agreement opened Japanese markets to US agricultural products. These achievements suggest the aggressive approach created enough leverage to secure concessions.

In the medium term, however, we're already seeing strategic adaptations by US trading partners. China has accelerated its "Made in China 2025" initiative to reduce dependence on foreign technology. The EU has strengthened its trade relationships with other partners. Mexico and Canada have diversified their export markets.

In the long term, the full implications remain uncertain, but history suggests that major powers that use their leverage too aggressively often find that leverage diminishing over time. Other nations adapt, new power centers emerge, and the international system evolves to be more resilient against unilateral pressure.

Finding the Balance: Transactional Tactics in Relational Contexts

Is there a way to balance the short-term advantages of aggressive negotiation with the long-term benefits of cooperative relationships? Some negotiation experts suggest a "firm but fair" approach that:

1. Clearly communicates your interests and boundaries
2. Responds proportionately to violations of agreements
3. Rewards cooperation with reciprocal cooperation
4. Maintains predictability in enforcing agreements
5. Separates the negotiation process from the relationship

This approach recognizes that claiming your fair share in each negotiation is important, but so is maintaining the relationship that allows for creating value over time.

A Bilateral World in a Multilateral Reality

One final consideration is whether Trump's preference for bilateral negotiations can succeed in a world where supply chains and economic relationships are increasingly multilateral. A bilateral focus might simplify negotiations, but it can miss important interdependencies in the global economy.

For example, addressing concerns about Chinese trade practices might require coordinated action with the EU, Japan, and other major economies. Bilateral deals might resolve specific issues but fail to address systemic challenges that require multilateral solutions.

The tension between bilateral simplicity and multilateral reality creates both opportunities and limitations for any trade strategy.

Questions to Consider

• As you evaluate ongoing trade negotiations and their outcomes, consider these questions:
• How will other countries adapt to reduce their vulnerability to US pressure tactics in future negotiations? Are we already seeing evidence of these adaptations?
• What's the right balance between asserting US interests forcefully and maintaining productive long-term relationships with trading partners?
• In what ways might a more transactional approach to trade negotiations reshape the international economic order, for better or worse?

The Negotiation Balancing Act

Throughout this series, we've explored the fundamentals of negotiation through the lens of international trade. From understanding BATNA to applying the four principles of effective negotiation, from harnessing the power of conviction to balancing short-term tactics with long-term strategy, the art of negotiation remains as much about psychology and relationships as it is about economics and policy.

Whether you view Trump's approach as a needed disruption or a dangerous gamble, understanding these negotiation dynamics gives you a framework to evaluate outcomes beyond the immediate headlines. The true test of any negotiation strategy isn't just what you get today, but what position you're in tomorrow.

As I look at the current state of international trade negotiations, I'm reminded of a quote attributed to various chess masters: "The amateur thinks about his next move, the master thinks about his next three moves, but the grandmaster thinks about the entire game." In the complex game of international trade, thinking about the entire game -- including how other players will adapt to your moves -- might be the most important skill of all.