By The Trump administration’s way of negotiating with tariffs has left the world unsettled, not knowing what the future consequences of this type of negotiation may be.
For this reason, The Long Brief has decided to interview Daniel Lacalle, one of the most influential economists of the 21st century. Currently working as an investment manager and former professor of economics, he is the author of several popular economic books published by the Deusto Publishing House, as well as a columnist and contributor to various online and television media.
Why do you think Trump made the tariff plan so aggressive?
The Trump administration understands that a soft approach does not work because it did not work in the 2016-2021 period. Mnuchin and Tillerson tried to negotiate better trading conditions for the United States and only found other nations dragging their feet and, in some cases, increasing their trade barriers.
The “Liberation Day” message was a wake-up call that implied playing hard to negotiate quickly and successfully. So far, it has worked, with more than fifteen countries indicating a willingness to negotiate a quick and successful trade deal.
Can this kind of aggressive negotiation make former US allies stop trusting “Uncle Sam”?
I don’t think it should be the case. Most global leaders understand that Trump is a negotiator who follows through on his campaign promises and delivers on what he said he would do. The consensus narrative is trying to tell us that the situation is binary: everything or nothing, and that is not the case. “Uncle Sam” is as reliable as ever.
He is not willing to pay for everyone’s defense and all trade imbalances, though.
The Trump administration finally withdrew the tariffs for 90 days; do you think it will use the same strategy again if it does not get better deals?
If countries propose negligible or insufficient deals, the tariffs will be implemented again; that is for sure. That is why negotiations are happening so fast and countries are more open about them.
From left to right: Madame Peng Liyuan, Xi Jinping, Donald Trump, Melania Trump in 2017 Source: Office of U.S. President
We see how the tariff battle between China and the US continues to escalate. Do you think this can continue? If so, who would be the most affected?
China can only lose. From 100 percent tariff upward, the escalation is meaningless. China’s trade surplus is so huge and its economy so closed that it has few options. Remember that China has a fixed currency, capital controls, a closed economy and an already significant real estate and economic problem.
With this policy, we see how more countries are getting closer to China. Don’t you think this could harm precisely what the Trump administration is trying to accomplish?
Getting closer to China because some don’t want to negotiate can only harm those that try that option.
China is one of the countries with the highest barriers to trade, and getting close to China is surrendering to a nation that will absorb others’ productive capacity.
The stock markets suffered, then they rebounded. Instability is not usually good for the market. How do you see this?
I am not worried about a stock market that rose too much and too fast, expecting central bank easing and rate cuts. Markets overreact sometimes, and this is a clear sign of going from overoptimism to excessive pessimism. Both were unwarranted.
Many economists have predicted a possible recession in the United States; could this come true?
Interestingly, those same economists seemed happy when the NBER changed the definition of recession in 2022 when Biden was in power and the economy had two quarters of contraction. I am not worried about a recession if it comes from cutting government spending. I wrote in 2024 that if the United States entered a recession, it would be due to years of government excess.
Finally, there are also many economists saying that China is the real winner in this trade war. Is this true?
They must explain to us how China can maintain its productive surplus without exporting to the United States. I believe that the comments from the Chinese government stating a willingness to negotiate tariffs indicate that their strength is limited.
