This trade makes that extension look even more weird now I agree. But he could have a role next year with all of our free agents. They must just think Smoak is acceptable as a starter should they whiff in the offseason. But if they can find an upgrade paying Smoak 4.25 million to be a bench player is a role they find acceptable at that price as well.
Seems like with both Smoak and Upton they are hedging their bets for next season. Both could start, although not ideally, and both are paid like bench players.