Florence Pisani: «Donald Trump’s Policies Won’t Solve the Problem»

Florence Pisani: «Donald Trump’s Policies Won’t Solve the Problem»

Florence Pisani, Chief Economist at European asset manager Candriam, explains in an interview with finews.asia where her 2025 forecasts went wrong – and why Trump’s economic strategy is heading in the wrong direction.

The US President’s diagnosis – that global imbalances in trade and capital flows are unsustainable – is correct. But his policies are not contributing to a solution, quite the opposite. Florence Pisani, Chief Economist at Candriam, explains why. And she also discusses where her forecasts for 2025 missed the mark.

Normally, it's a routine matter: economists review in June the forecasts and assessments they made in December for the coming year and make adjustments. But 2025 is different, mainly due to Donald Trump’s unpredictable political style. As a result, investor demand for information has increased significantly.

Ms. Pisani, has Donald Trump followed the script you outlined at the end of last year?

The US President has done what he promised before the election – in tariff policy and on immigration. And with the «One Big Beautiful Bill Act» (OBBBA), which he now wants to push through Congress, he’ll also fulfill his campaign promise to cut taxes further – «no tax on tips, no tax on overtime.»

However, our main scenario back then assumed that tariffs would only be «soft» and moderately increased. On «Liberation Day,» it looked more like our alternative «Hard-Trump» scenario was materializing. After the back-and-forth of recent months, we’re now somewhere in between.

The President seems to love tariffs as much as economists hate them.

To him, they are a multi-purpose weapon aimed at several goals: getting companies to build factories in the US rather than import goods, reindustrializing the country, and using tariff revenues to offset the tax losses expected from OBBBA.

«Tariffs are Trump’s multi-purpose weapon to pursue multiple goals at once.»

Are tariffs really that bad? After all, they’re transparent and relatively negotiable – unlike non-tariff barriers such as subsidies, standards, quotas, and so on.

Trump has a point when he considers not only tariffs but also other measures. But across-the-board tariffs on all imports make no sense – no country wants to produce everything itself. Selective tariffs, like in Trump’s first term or the EU’s current ones on electric vehicles, can make sense – one shouldn’t wait until one’s own industry is entirely destroyed.

What has surprised you most about the US in the past six months?

We didn’t expect trust in the dollar to be so shaken. And confidence that the US will continue to guarantee Europe’s military security has also diminished.

International organizations have warned for decades about global imbalances in the economy, trade, and capital flows. You and your former colleague Anton Brender even wrote a book on the subject after the financial crisis. Is Trump right in saying that today’s situation is unsustainable and must change?

Yes, he has a point here, too. The US should consume less and China more. And Europe needs to invest more in infrastructure and defense, which now seems to be happening.

How can the imbalance be addressed?

Certainly not the way Trump is doing it – creating uncertainty with grandstanding and unpredictability, raising tariffs sharply, and cutting taxes. Uncertainty discourages companies from investing in the US.

Tariffs alone are far from enough to reindustrialize America; that requires skilled workers via vocational training, investment in infrastructure, R&D, and more. At best, the OBBBA tax cuts won’t further inflate the already massive fiscal deficit and external imbalances.

Didn’t economist Arthur Laffer show with his famous curve that tax cuts can pay for themselves through the resulting growth impulse?

Unfortunately, the Laffer Curve has never really worked in practice – neither under Ronald Reagan nor during Trump’s first term. The growth rates assumed in OBBBA are also far too optimistic.

«Unfortunately, the Laffer Curve has never really worked in reality.»

You mentioned the US deficits, but isn’t the real issue the debt itself, which spiraled out of control after Bill Clinton’s presidency? Until now, the economic consensus was: debt is a long-term problem, but we can kick the can down the road. Does that still hold?

No, that certainty has also been shaken. On paper, the solution is simple: the US has low taxes and could raise levies on the ultra-wealthy. But neither Democrats nor Republicans are willing to consolidate the budget. OBBBA will only worsen the situation, as almost no spending cuts are planned to offset the massive tax reductions, apart from cuts to Medicaid and other essential social programs like child nutrition.