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