The International Monetary Fund (IMF) was going to appoint Ricardo Reis, professor at the London School of Economics (LSE), to the position of chief economist, but backed out at the last moment after learning of the Portugueseman's public criticisms of Donald Trump's economic policy. According to the Financial Times, Ricardo Reis had warned, more than once, that the increase in customs duties would raise prices for North American consumers and trigger a new wave of inflation. The IMF ended up choosing Silvana Tenreyro, former member of the Bank of England and also an LSE economist.
In a speech delivered in Lisbon, during a conference for the 150th anniversary of Caixa Geral de Depósitos, Ricardo Reis considered that newspapers gave great prominence to the announcements of high tariffs by the Trump administration, but little attention to the rollbacks and the enormous exemptions that sectors, goods or even friends of Donald Trump were receiving over the weeks. The economist estimated that the tariffs effectively applied by the US to the rest of the world are around 7%, and not the 25% or 50% announced, with 90% of that cost ultimately being reflected in the American consumer's pocket.
Ricardo Reis also spoke about what he called "financial repression," explaining that the dollar's devaluation reflects a shift in the appeal of investing in the US compared to investing in the rest of the world. The LSE professor highlighted that the US openly discusses ways to impose different taxes on foreigners, block or impose capital controls, something he considered never to have been imagined regarding the US.
The economist warned about the end of what French former President Charles de Gaulle called the American "exorbitant privilege." For decades, the US benefited from lower interest rates than Germany, but for the first time in over 30 years, the American state borrows more expensively than the German state. Ricardo Reis considered that creditors perceive that the Trump administration would be willing to tax payments on American public debt. Despite this loss of confidence, the dollar did not devalue further due to Artificial Intelligence, which continues to attract investment to the US.
