Trump is using the “Paradigm of the Crazy Man” with the tariffs. But “When this is applied to the economy is a disaster”

Interview || The diagnosis at the base of the tariff war that the US president has launched and now paused partially and temporarily can even be rational, but rationality ends there. This is what António Costa Silva, former Minister of Economics and Specialist in Economics and Management. In an interview with CNN Portugal, he accuses Peter Navarro, Trump’s tariff ideologist, “selling the president this great conspiracy theory that the whole world has come together to plot the US,” says the 90 -day break will not reverse the damage caused to the world economy and points out to EU and Portugal. Also, he stresses, “it is an illusion to think that things with Trump will be different”

CNN – There is a temptation to look at this tariff war as irrational and chaotic, but Donald Trump’s administration is, at least in part, in some rational arguments, namely on the issue of commercial deficit – in this idea that the US has been the great losers of globalization as opposed to China as a big winner. Peter Navarro, the tariff ideologist, that Americans have been greatly harmed by the World Trade Organization (WTO) and speaks in the correction of “injustice” … Do you see rationality in this American decision?
António Costa e Silva – It is necessary to distinguish two analysis plans. In the plane of causes and the situation, there is clearly rationality, it is sufficient to read the one that constitutes the decision of the tariffs. The central issue is this concern with the commercial deficit, because the United States has managed the economy over time with deficit accumulation. Trump then connects this to important issues such as deindustrialization, loss of capacity in some key areas, the decline of industry-manufacturing represents only 11% of US GDP, but accounts for over 50% of innovation and 60% of exports. There is this appeal to the country’s reindustrialization, and then also connects reciprocal tariffs to national security issues, when he says the US has lost skills to manufacture ships, cars, value chains, critical materials … This is a rational diagnosis.

CNN – Where does irrationality begin?
ACS – Irrationality begins in the method of combating the problem, in all that derives from there. The central question here is that there is a fallacy when President Trump says the countries have all come together to steal the US. This is not what happens. In fact, the US is the main beneficiary of the international economic order. His complaint is regarding the trade of goods, but has no word to say about the trade of services, which is absolutely dominant in the US – they represent almost 70% of the world service market when Europe represents only 6%.

In the issue of deficits, it attacks, from a point of view of the guilt, but the US is consumerists and Trump does not have a word to say about the decline of consumption. Mohamed El-Erian, who predicted the 2008 crisis, does a good analysis in his book “, he has identified this for a long time, this danger of continuing on this wave of deficit accumulation, which contaminates the world economy. And it says that to resolve this, the US has to negotiate with partners, reduce consumption, reverse deficits, and that Europe and Japan have to commit to increased productivity and China has to stimulate internal demand. He says it takes a kind of new, a new deal with partners. But Trump’s method is combat and actions are counterproductive.

CNN – This had already been verified in its first term, when it eliminated the Transpacific Partnership (TPP), which had precisely this goal…
ACS – Exactly. Speaking of this international agreement, last summer, at the Manhattan Club, I had the opportunity to hear a communication of Scott Bessent, the Treasury Secretary, who looks like one of the most reasonable men of this administration, saying that all these problems have to be solved with a new agreement, there must be talks. When you reach this state, this is highly injured. Trade is one of the foundations of world development, coupled with technological advances, and when world trade is questioned, when the markets are questioned, this is highly harmful.

CNN – We talked about rationality or lack of it in the decision to apply rates. But what is the rational behind this 90 -day break? In a way, Trump’s declared goals are at risk: if tariffs are reduced or nullified, the US industry shifting that it intends to never happen, but if commercial allies suspect that they are still committed to protectionism, they will question why they should make concessions to the US…
ACS – The president is using tariffs to reverse the commercial deficit – something that won’t work – but also. But in a negotiation there has to be confidence, the worst thing is that there is no confidence, and what he is doing – as, by the way, the big American investors and the big funds and the big financial companies are saying – is destroying confidence, including business partners. And without it it will not be possible to reverse the situation. See what is happening, there is a stoppage of the investment. If we look at the Standard & Poor’s index, to Nasdaq, for Dow Jones, they have had a crashnow they are recovering, tomorrow Trump says something else and they fall back – and all this has to be analyzed also under the VIX index, the index of fear, volatility, which is at the fullest at this time. Trump has this special talent for unpredictability. Want the relocation of companies, but what companies are doing is stopping to see. In such an environment no one will decide to make large investments, not until there is a minimum of stability.

CNN – Assuming Trump even gets this reshoring, this moving from companies to the US, is something that will take a long time, just as the loss of industry has happened over decades. How does a country reindustrialize?
ACS – Note, deindustrialization was the result of choices of US political and US companies, who preferred to move to Asia, which has cheaper, more competitive working costs and was all done in a globalization cycle with which the US has profited a lot. Have now having cheaper and competitive products [fabricados no estrangeiro] And they bet on areas where added value is generated, areas such as software, information and communication technologies, which generate more value. And then there was a bet on services, a process of serving the American economy, with fundamental poles that create value and wealth, and the US is dominant in this area. Clearly, if they want a new cycle of reindustrialization… He is very concerned, he talks a lot about the construction of ships, metallic products, equipment, weaponry, important things for national security, is a serious matter. But that the US also purchases on other sides of the world. And the nuclear and military part, these industries the US retained.

CNN – Deep down, Trump has a very selective speech about what America has to gain or lose over the rest of the world…
ACS – Precisely. It is amazing how, in the face of reality, it chooses two or three things that can serve an idea. Trump is hostage to Peter Navarro’s theory of commerce, a conspiracy theories promoter, who sold to the president this great conspiracy theory that the whole world has come together to plot the US. Even that tariff calculation table has no nexus, it is a completely wrong and random method, it is not based on the cost that the US pay for imported goods, but its commercial deficit with countries in export percentage. It is totally random, and the World Trade Organization figures show this. My opinion is that it is a pretext for triggering a war that will not have many effects and those who have, as we are seeing, are harmful.

CNN – Even with this temporary break, many analysts consider that evil is already done and that damage to the world economy is deep and difficult to reverse, including taking into the war with China, a war between the two largest economies in the world, endless. Do you agree? Is it possible to reverse the damage caused?
ACS – In some conditions, but not in full can be reversed. The damage is already done. Notice, JP Morgan had a 60% recession probability forecast and maintained this forecast even after Trump’s retreat, because he has done this with Mexico and Canada and then tomorrow has a different decision again. This is what, in diplomacy, is called the paradigm of the crazy man, in which he negotiates to inspire fear on the other side. But when this applies to the economy is a disaster, the economy needs certainty, confidence, predictability. And now the Trump administration is the main factor of destabilization of the world economy. See, he declared war on 185 countries. Even in the US, many analogies are discussed with 1930, when the US approved a tariff law to crash the great depression it had started in 1929-they applied tariffs from between 5 and 6% to 25 countries. And what happened then? Everything worked on the contrary: US exports collapsed, the economy as well, and the great depression deepened each other even more. And now we have much higher rates against 185 countries. This is a revenue that has already been proven that it does not result.

CNN. What is your opinion?
ACS – I would say that we have to do an analysis to what the US represents in terms of world trade. The US, as we know, are an economic, military, technological and now energetic superpower, are the largest producer of oil and gas – but it is not a commercial superpower. The big powers are China and Europe and that is why I advocate a commercial rapprochement from Europe to China, along with a large switching platform with democracies such as India, Japan, South Korea. China has already begun to do so, Europe should do the same, and explore mercosur markets, explore possibilities-and Portugal should do the same. We, through Macau, have a platform to reach the large bay, which represents 12% of China’s GDP. But all this has to be articulated.

CNN – Lack of articulation in this market of 450 million consumers that is Europe?
ACS – Missing, this is a work that the European Union has not done and continues without doing, the work of promoting the potential of its unique market. There was a study of the International Monetary Fund (IMF) and a while ago Mario Draghi also raised this issue in one, about the barriers that still exist today inside the EU.

CNN-Refers to barriers between Member States?
ACS – Yes, barriers between Member States are a major obstacle. It had this extraordinary conclusion: it is that these barriers represent a 45% tariff of goods and 110% on services. Europe has not yet been able to free this immense potential. On the day you can make up these wounds that were opened a lot. At this time, we are not linked in energy, neither capital, nor have a European service market, there are many barriers to circulation… We have to work on these various points.

CNN – Trump’s America at the same time at the same time, at the same time?
ACS – No, we need to give importance to the US and what they give us. But at this moment, it is an illusion to think that things [com os americanos] They will be different. Europe is one of the great hatred of President Trump and from there will be nothing more, unless it is really pressured.