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Well, negotiation is obviously an
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important part of any good business and
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an important skill for a business owner.
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In many cases, strong negotiation skills
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can be the difference between success
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and failure. But with all the
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conversation around tariffs being
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instituted by the White House right now,
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it brings forward the question of what
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tactics are being used in this process
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of trying to deliver tariffs. Richard
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Shell is a professor of business ethics
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and legal studies and management here at
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the Wharton School and he joins me right
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now. Richard, great to talk to you
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again. How are you, sir? I'm fine, Dan.
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Thanks for having me. Thank you. You
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know, one of the things I I saw and you
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had tal written about this in a paper a
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while back, but you mentioned the fact
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that negotiation is tied to leverage and
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maybe even more so within what President
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Trump is trying to bring forward.
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Explain that a little bit to us. Sure.
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Leverage is a concept in negotiation
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that's sort of the number one
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situational variable and that is as
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between the parties at the table who
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thinks they have the most or least to
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lose from a deal not happening. And so
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the u the measurement of that is always
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relative. It's uh often based on
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perceptions. But Trump is a master at
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manipulating perceptions and uh
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situational factors to try to give
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himself situational advantage, which is
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what leverage really is. Uh all right.
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So then uh as we see what is playing out
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right now, what is the strategy that
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he's trying to implement here in in this
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process? If only we knew, Dan. Uh uh I
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mean strategy is probably not the word
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you'd apply to Trump. tactics are. Okay.
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Uh and I think tariffs uh for him are a
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very familiar tactic and that is impose
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costs on your counterpart, make them um
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uh think about the no deal alternative
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in a much worse way than they did before
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and then negotiate from that position.
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And in in his business career, he was
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famous for using litigation to impose
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costs on suppliers and partners whenever
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there was any kind of dispute. And I
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think what he's discovered in this
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administration, he he toyed with it in
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this first administration, is that
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tariffs are a wonderful way to shift the
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balance of perceptions and that, you
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know, come to the table. We've got all
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this consumer power. We're going to
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impose tariffs on all your goods.
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basically deny our market to your goods
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and then we'll talk to you. Uh it of
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course tariffs are different than
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litigation because tariffs affect the
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domestic consumer and hurt them as well
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as uh foreign producers. Uh but I think
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we'll see. You know, it's only been 100
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days. I think his gamble is that these
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terrorists won't bite the consumer uh as
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quickly as they will the foreign
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producers and that'll bring them to the
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table. How then potentially could the
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concept I guess the larger concept of
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litigation play into the mix moving
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forward here? Well, it Trump was famous
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for suing uh before talking uh all the
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way through his business career, but he
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was also very very
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um commonly uh settling at the end. So
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his goal in litigation was not to go to
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trial. his goal was always to use it as
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a lever and then uh extract advantage
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from the costs involved. And I think
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we'll probably we're already seeing some
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of that with the tariffs. He he he
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throws a big uh you know curveball into
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the global economy and the next day or
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the next week he withdraws half of it or
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all of it uh and is destabilizing
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things. And uh so I think what you know
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I don't think he's the kind of guy he
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doesn't like to go to war. I don't think
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and I don't think he likes uh to have um
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significant damage as the
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outcome. But how does then when you're
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talking about you know somebody who
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wants to negotiate in that style, how
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does the other side either react or
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maybe to a degree understanding that
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this is the concept prepare for this
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type of it's a great question. It all
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depends. So if you're China and you have
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a great deal of leverage of your own,
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then I think they're standing fast. Uh
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in other words, uh uh don't don't
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concede uh to this when you have your
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own power and and then have a
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conversation between equals. If you're
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Canada, then I think you have a
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patriotic issue. We're having an
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election today in Canada about that. uh
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but I think you're going to see uh a lot
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more interest in uh you know issue by
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issue product byproduct kind of
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negotiations over these as the posturing
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piece ends and the transactional piece
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starts and one of the other things I I
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saw that you wrote and it's important
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component here is the fact that in many
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cases with these negotiations that
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President Trump may be involved with or
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is around he's not necessarily the point
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person in the No that's his his style is
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is is very defined in that way. He
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throws uh he throws the the whole system
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into uh dis you know
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disequilibrium and then he's got a set
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of negotiators he's always worked with
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throughout his business career and now
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that go out in in this case he had Musk
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you know as a and and Musk's people
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going into the federal bureaucracy to u
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to to implement things he's got u his
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treasury secretary he's got his
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secretary of state others that are out
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there negotiating sort of dayto-day
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today and then coming back. That leaves
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him with the role of being the great um
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settler, the great the great uh
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dealmaker. Uh and it's often the case
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that he wants his negotiators to be more
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aggressive
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uh as as aggressive as possible so that
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he can be the one who goes, "Well, let's
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settle this." And that makes him look
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like the guy who won. So, how different
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is President Trump as a negotiator
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through this process than say 1980s
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Donald Trump as a real estate person? I
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I don't think there's a great deal of
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difference. Uh I mean his his uh his
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style has been marked from the very
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beginning of his business career as
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having these features an u an astute use
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of leverage uh a very proactive way of
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managing perceptions of the cost of no
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deal and imposing them on the other side
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and uh and walking out lots of of
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termination of negotiations, lots of
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bluster uh and then a lot of aggressive
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negotiators working for him. uh that he
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then mops up after. Is it a good process
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then to follow in terms of the idea of
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negotiation? Well, it's a transactional
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style of negotiation that cares zero for
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relationships. It's nothing that we
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teach at the Wharton School. It's
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nothing that's taught in most law
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schools or uh international diplomacy
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schools, but it is a style and it's very
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defined. He's branded it essentially
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with his book, The Art of the Deal, and
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with his behavior. And so it, you know,
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it it is it is effective to the extent
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that it requires others to adjust to
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him, but it is ineffective to the extent
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that long-term relationships and
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information exchange and creative deal
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making uh creating value are uh part of
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the story because people don't people
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will not trust him and they shouldn't.
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Richard, great to talk to you again.
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Thanks very much. All right, Dan, take
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care. Richard Shell, who is a professor
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of business ethics and legal studies and
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management at the Wharton School.
