We propose a physically motivated decomposition of DFT 3-body nonadditive
interaction energies into the exchange and density-deformation (polarization)
components. The exchange component represents the effect of the Pauli exclusion
in the wave function of the trimer and is found to be challenging for density
functional approximations (DFAs). The remaining density-deformation
nonadditivity is less dependent upon the DFAs. Numerical demonstration is
carried out for rare gas atom trimers, Ar2-HX (X = F, Cl) complexes, and
small hydrogen-bonded and van der Waals molecular systems. None of the tested
semilocal, hybrid, and range-separated DFAs properly accounts for the
nonadditive exchange in dispersion-bonded trimers. By contrast, for
hydrogen-bonded systems range-separated hybrids achieve a qualitative agreement
to within 20% of the reference exchange energy. A reliable performance for all
systems is obtained only when the monomers interact through the Hartree-Fock
potential in the dispersion-free Pauli Blockade scheme. Additionally, we
identify the nonadditive second-order exchange-dispersion energy as an
important but overlooked contribution in force-field-like dispersion
corrections. Our results suggest that range-separated functionals do not
include this component although semilocal and global hybrid DFAs appear to
imitate it in the short range