But he believes the youngster needs to come out of his shell.
Trapattoni said: "James has the good qualities but I have told him 'I will punch you if you don't stop being shy'.
"McCarthy is growing. He has qualities but he is young, only 22 and he needs to have more confidence because he will grow and he will increase these qualities.
"In every training session we see him improve but he does not dominate yet. He must do more.
"Sure he can play for one of the top clubs in England. He shoots, he sees the pass immediately, sees the ball and always has the solutions. I won't discuss his club, because there are other problems. He has to be confident and say 'I am James McCarthy, I can do this, I can'."