Playing the Two-Level Game With Trump: Greenland Edition

To the relief of Greenlanders, Danes, and everyone who counts on NATO's continued existence, on Tuesday President Trump, Danish Prime Minister Mette Frederiksen, and Greenland Prime Minister Jens-Frederik Nielsen signed a three-party agreement that effectively and, by its terms, permanently, resolves the crisis Trump precipitated by his threats to use any means, including military force, to seize control of Greenland. As has been widely reported (e.g., here), the agreement falls well short of the "ownership" Trump claimed that the United States needed in order to ensure the national security advantages of a military presence in Greenland. Indeed, it is hardly clear that the agreement represents any significant change from the status quo ante.

So, naturally, the White House is touting the deal as a "historic," "unprecedented," and "landmark agreement" that "comes at no cost to American taxpayers." No cost, that is, except for the enormous erosion of U.S. credibility that came first from threatening a friendly NATO member with invasion and then by backing down.

Don't get me wrong. I'm glad Trump didn't follow through on the threat to invade Greenland or otherwise wrest control over it from its people and Denmark. My point is that the episode provides a window into how deal making works under Trump. It is almost entirely harmful but, as I shall explain at the end of this brief essay, Trump's approach has one apparent advantage: if counter-parties handle Trump delicately, they might avoid the ordinary pitfalls of what Robert Putnam famously called two-level games. But as I shall also explain, doing so is very challenging.

I haven't read Trump's ghostwritten Art of the Deal, so I don't know exactly what precepts Tony Schwartz credited Trump with believing or practicing in negotiations, but I can infer some principles from observing Trump's conduct in private business and especially during his presidency. From his business career, we can infer at least the following:

1) Exaggerate, mislead, or outright lie about your wealth and the value and quality of what you're selling.

2) Don't pay your bills.

3) Break promises whenever it appears to be advantageous.

4) Threaten and frequently file frivolous but expensive litigation.

Trump was not a successful businessman. Six of his businesses--including a casino--went bankrupt. Yet while those bankruptcies revealed Trump to be bad at actually running his companies, they did show him to be good at leaving others holding the bag for his failures. He also was, and remains, remarkably good at promoting his personal brand.

Despite greatly increasing his wealth while in office, Trump hasn't become a better businessman. True, Trump's cryptocurrency ventures earned him $1.4 billion in 2025, while the pre-presidency Trump University ended up costing Trump millions once one factors in the $25 million he paid to settle claims by the former students who sued him. But Trump hasn't got better at extracting money from suckers. Rather, as president he has exploited new opportunities for corrupt enrichment. The big investors in Trump's crypto ventures are not suckers. They are managers of foreign sovereign wealth funds and others who understand that their investments are not designed to make money for themselves but to purchase influence with Trump as president.

Still, fair is fair. I will give Trump credit for being good at corruption. That makes it all the more remarkable that he is so bad at making deals on behalf of the United States. The Greenland deal is typical. Trump blustered and threatened, but when push came to shove, he settled for a deal that didn't alter the status quo.

At least that's better than the Iran situation. First-term Trump withdrew from the JCPOA because he associated it with President Obama. Second-term Trump almost certainly could have gotten something like the JCPOA but he didn't want it precisely because it would look too much like the agreement he had spent years deriding. Thus, ignoring the warnings of military leaders, he launched a disastrous war that has achieved none of its strategic aims. Eventually the war will end and some sort of negotiated resolution will leave the Iranian regime in a much stronger position than before the war began. At that point, Trump will boast that he has achieved a "historic," "unprecedented," and "landmark" deal that none of his predecessors could have pulled off.

This sort of pattern can be found domestically as well. Nine law firms settled with the Trump administration, succumbing to his absurd executive orders (or in some instances what they worried would be forthcoming orders) that punished them for acting as lawyers for persons or causes Trump disliked. Those settlements included some required changes in hiring practices (mostly concerning DEI) but the big-ticket item was the promise to donate hundreds of millions of dollars worth of pro bono legal services to causes Trump approved. Some of that appears to include questionable legal services to government agencies, as highlighted by a letter to Skadden Arps by three Democratic Senators.

I share the concerns highlighted in the letter just linked but I want to focus on a different aspect of the agreements Trump cut with the law firms: they contain no mechanism for monitoring or even valuing the pro bono legal services. A little over a year ago, I had an eye-opening conversation with a lawyer at one of the firms that settled. This lawyer told me that there was utter confusion within the firm about what to count and how to bill. The lawyer did not say that the firm was padding its pro bono hours to reach the required dollar figure but did make clear that if the firm were to do so, the Trump administration probably wouldn't know and almost certainly wouldn't care. The important thing for Trump, this lawyer emphasized, was the headline with a big number. Once the administration got that, follow-up was unimportant.

There is a catch, however. Trump doesn't want to be seen as the paper tiger he so often is. Consider that early this year, the NY Times reported that Harvard and the administration were nearing a deal because Trump had dropped a demand that Harvard make a $200 million payment as part of it. But within hours of reading this reporting, Trump took to Truth Social to angrily deny that he had backed down and to demand a billion dollars from Harvard. Presumably, if Harvard had agreed to settle with the administration, even without agreeing to pay any money (as Penn settled without paying any money), Trump would have boasted about all the ways in which he had gotten Harvard to change. But once the dropping of the $200 million demand was portrayed as a backing off, the deal blew up.

The Harvard scenario is a variation on Putnam's examples of two-level games. Often when two national leaders are negotiating, it is useful for each side to portray the resulting agreement as a win. Insofar as the agreement includes win-win arrangements, that's easy to do. However, some elements may be zero sum. In those circumstances, each side will be inclined to exaggerate the favorability of the deal so as to maintain domestic political support from constituents. Yet too loudly declaring victory could be heard by the other side's constituents, leading them to withdraw their support and jeopardizing the agreement. This is the two-level problem. A leader must be able to signal to his own constituents that he got a good deal without thereby tipping off the constituents of the other side that their leader got a correspondingly bad deal because that could blow up the agreement.

There is an interesting twist in Trump's case. His constituency is not the American people, who currently have him at historically low approval levels. Rather, Trump is his own constituency. And although he lives in a bubble that mostly allows him to tell himself he really is the remarkable world-historical figure he imagines himself to be, some news filters through--especially indications that others regard him as weak or as having caved. World leaders who flatter Trump understand this dynamic very well. That's why the Prime Ministers of Greenland and Denmark are not boasting about how they got Trump to back down.

The two-level problem does not simply vanish, however, because leaders cannot control all the information. Trump can read in the Times that his agreement with Greenland and Denmark falls far short of what he had been demanding. Then, as with Harvard, he could become enraged and issue new demands.

The bottom line puts the public in an awkward position. The fact that Natalie Harp and others in Trump's inner circle try to shield him from bad news is generally harmful, as it contributes to his terrible decision making. But when Trump backs down from his extremely damaging threats, the public benefits from the bubble. In those circumstances, we must hope that Trump is sufficiently out of touch with reality that he doesn't realize he has been exposed as a blowhard. The TACO phenomenon depends to a large extent on Trump not learning or admitting to himself that he is chickening out.

-- Michael C. Dorf