North Korea developments mean it's time to think about the upside risks of the Trump presidency

Josh Barro/Business InsiderLike any risky investment, a Trump presidency presents a range of possible outcomes, some worse than others.
  • I’m revisiting my view on the risks of a Donald Trump presidency.
  • Developments in Korea are an example of how Trump could produce upside surprises a “normal” president wouldn’t.
  • Serious downside risks remain.
  • But by looking risky, Trump may be inducing a de-risking by other world powers.

Two years ago, I wrote that Donald Trump was “the tail-risk candidate.”

I produced this whimsical chart of potential outcomes. And I defended my choice of a two-tailed distribution:

“Guy Cecil, who runs the pro-Hillary Clinton super PAC Priorities USA, says that you shouldn’t call Trump risky ‘because “risk” entails potential upside.’ I disagree – it’s correct to call Trump ‘risky’ because his potential presidency presents upside and downside risks, even if the downside ones are more important.”

To Cecil’s point, I spent Trump’s first year worrying a lot about that left tail of the risk distribution – for example, telling my liberal friends that, no, Mike Pence is not worse than Trump, because I’m not afraid President Pence would get mad on Twitter and fire nuclear missiles at someone.

But as tensions in the Korean peninsula have ratcheted down over the last few months, I have spent less time worrying about the left tail. I’ve even allowed myself a little hope that we’ll get a right-tail outcome that has eluded presidents for decades: peace and stability on the Korean peninsula.

The Korea situation presents the clearest example of the upside risk of Trump: A positive outcome he might achieve that a “normal” president likely would not have.

This Korea gambit probably won’t work – but it might

Trump started his presidency with roughly the same set of goals presidents always have on North Korea: Get the Chinese to be more helpful with economic sanctions as we and our allies present a united front pushing for nuclear disarmament and improved human rights.

The problem is the North Koreans believe (not unreasonably) that nuclear weapons are essential to deterring Western attacks and maintaining their independence. And the Chinese prefer not to pressure the North too hard, because they prefer a stably divided Korea over a unified, pro-Western one.

So Trump did what he does – ranted and raved and tweeted and threatened and used derisive nicknames – and scared the crap out of a lot of us, who worried he would provoke North Korea in a way that would escalate to a nuclear exchange.

He probably scared the North Koreans and Chinese a lot, too. He definitely scared the South Koreans.

But now, everything seems to have cooled down – a lot.

The new, dovish South Korean government has pushed for reconciliation and talks, including this week’s historic summit where North Korean leader Kim Jong Un entered South Korea. China’s been somewhat more helpful with the sanctions, probably because escalation into a US attack on North Korea wouldn’t serve their goal of a stably divided peninsula.

And Kim has paused nuclear and missile tests and has made the right noises about “denuclearization” – though he wouldn’t be the first North Korean leader to talk a good game and shrink from substantive moves.

I realise it’s likely these talks will lead nowhere productive. But since nothing productive was likely to happen in our relationship with North Korea anyway, I do not view that as a downside risk.

Unless Trump recklessly makes substantive concessions to the North – and so far, the “maximum pressure” policy of economic sanctions remains firmly in place even as we move toward talks – a failed thaw should only mean the difference between wasting time talking and wasting time not talking.

Plus, time Trump is spending preparing for a summit with Kim is time he’s not spending tweeting about his “nuclear button.”

And in the unlikely event that Kim really wants to make history and the talks can lead toward a stable peace, it will be Trump’s unlikely style of diplomacy that got us there.

That’s right-tail risk.

Trump’s left tail is still a concern, but status-quo foreign policy also had downside risks

Some of Trump’s out-of-the-box foreign policy choices are dangerous. I don’t like when he talks down NATO, and I don’t like his eagerness to walk away from the Iran deal(though the latter proclivity he would have shared with a “normal” Republican president).

There are a lot of cases in which institutions are working and exist for a reason, and Trump courts danger by casting them aside.

But in a handful of cases, Trump seems to be the one to understand that an existing foreign-policy approach is untenable, even if the complex of foreign-policy experts on both sides of the aisle – what top Obama foreign policy aide Ben Rhodes called “the blob” – are convinced there are no alternatives.

The blob led us into a lot of major mistakes over the last 20 years – outcomes in the left tail of the foreign-policy risk distribution, long before we elected Trump.

Plus, there is one perverse way a Trump presidency may be making us safer.

A few years ago, the Economist’s Greg Ip wrote a book called “Foolproof,” about how feelings of safety can lull people into taking risks, while feelings of vulnerability can induce a useful caution.

Is Trump’s apparent volatility making Pentagon leaders more reluctant to recommend military action than they would be with a normal president? Is it making European governments step up and strengthen their own military defences? Has it forced China and the Koreas to seek out their own solution for regional security because they can’t depend on the US to keep the region stable?

By forcing other players in the system to take safety and security into their own hands, Risky Donald Trump may be inducing a de-risking.

Unfortunately, he’s done it by scaring the crap out of everyone. But it’s still a reason to think that left risk tail may not be as fat as it looked at first glance.

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