Trump's gdp numbers on average are stuck at 2 percent. He did nothing for the economy besides cause it to tank by mismanaging covid. covid case rates have shot up to 80,000 a day, and boeing laid off 11,000. people wake up every day fearing that their jobs are in danger because of a pandemic that is completely out of control,and trump is only making it worse by superspreading the virus at his rallies and by suppressing votes in the swing states-stationing thugs, filing law suits to contest well established rules and force people to vote in person.he is aggressively trying to keep democrats and independants from voting. this,along with his intimidating and threatening the media and his critics,and twisting ukraine's arm to extract political dirt, is pure fascism. biden is a strong believer in US democracy and free media.We have seen it in his long public service and when he was vp. the trump falsehoods about him are laughable. trump is communist and fascist in one. trump authoritarianism and dictatorship is communism. democracy is on the ballot. trump's fasicm,authoritarianism,corruption and crony capitalism have become america's biggest export making the world fascist again as it was in the 1930s and 1940s.trump is hitler and mussolini's revenge. Will america let the huge sacrifice in two world wars be lost right here in america ? stand up for US democracy. do not take it for granted. you don't know what you have lost.barr is bailing out his thugs.his thugs intimidate voters
whatever happened to free trade ?protectionism is an old idea.dick gephardt ran on it in 1988,targeting japam.their fault was that they were exporting innovative, cheap and high quality products-VCRs,the sony walkman, toyota and honda,and DRAM chips.Apple, netflix and tesla, and building the cars here caused the trade tensions to die down-but americans still love their toyotas and hondas.tesla is pricey and not as reliable.trade tariffs and wars make products much more expensive and consumers get less value.it is an indirect tax.nobody is supporting a china dumping cheap, poor quality,and unsafe products on amazon.but the trade deficit with china has only grown,and we are paying an indirect tax,which can be large for disadvantaged americans.
when exports become more expensive because europe and china retaliate with tariffs.competitors can then price their products better,and in fact it gives china the advantage.trump is simultaneously killing off american innovation by restricting talent from elsewhere from working here. we lead the world in nobel prizes in science.international students flocking to US universities bring in a lot of revenue to the economy-those students pay high non-resident fees.silicon valley is america's and the world's greatest center of innovation and high tech jobs creation for many decades now because it is a melting pot for creativity and innovation.trump's trade war is a total failure hurting jobs and the gdp everywhere in the US, and boosting china
Who knows what’s Trump is!!
That really is not a question because it lacks an answer. Trumps reasoning of the use of tariffs are locked inside that same brain.
Sounds like a good argument for creating a new system that isn't so easily corruptible by Fox News and the conservative elite.
Isn't the fact that the European Central Bank turned Greece into a Third World country and pointlessly visited similar though lesser afflictions on Italy, Spain and Portugal a far greater indictment of the EU than the fact that it's utterly opaque and thoroughly anti-democratic bureaucracy tolerates the likes of Victor Orban?
As for free trade: If granting China full trade normalization and passing NAFTA and other trade deals had been such wonderful developments, wouldn't we all have been happy as clams over the past couple of decades?
IMO, it is no longer a trade war with China, but something deeper. I am less and less optimistic and more pessimistic. Because of Trump's China Tweets, the USA now views China as an economic predator. China, in turn, views the United States as a model of Western power trying to humiliate China as in the 18th century. China knows Trump cannot be trusted, is a white nationalist and thinks no more of the Chinese than he does of Muslims and Mexicans. Nothing is stopping China from refusing to buy and dumping US Treasuries in the Fall of 2020 and tank the stock market just before the election.
I don't like any of Trump's policies except one and that's getting tough on China's economic policies. For years I felt they were getting away w unfair trade practices and they took advantage of that. So I was OK w Trump getting tough on China's economic policies. And that troubled me since what my learnings in school thought me was that free trade and comparative advantage was a good thing. Previously, I thought I was disagreeing w Paul K but it turns out that's not really the case. He indicates (at least the way I interpret it) is that going after China is OK but whereTrump really screwed up big-time is in how he did that. As Paul states
"Yes, there is — or there would be if the tariffs on Chinese products were an isolated story, or better yet if Trump were assembling an alliance of nations to confront objectionable Chinese policies. But in fact Trump has been waging trade war against almost everyone, although at lower intensity. When you’re imposing tariffs on imports of Canadian steel, on the ludicrous pretense that they endanger national security, and are threatening to do the same to German autos, you’re not building a strategic coalition to deal with a misbehaving China."
And I think that captures what I'm really thinking.
I seem to recall an article from a while back (not positive though) where Mr Krugman was advocating for a Value Added Tax for all our goods. In my mind this would be a consumption tax. Why is that different or more beneficial than Taffifs on just foreign consumption?
Would anyone be able to speak to the difference between the two?
Thanks!
I have a thought. The GOP is really good at things like the "October Surprise"--that is, cutting secret back-door deals with our enemies, often illegally and at great (albeit hidden costs to Americans), to look good and gain an advantage. I suspect this will go on until 2020, when China will "agree" to some (prearranged) "deal" and the Cesspool will bubble up some declaration of victory. The deal will be nominal at best, we'll end up in a worse position that we're in now, but the rubes will buy it.
1
I agree with Mr Krugman about the need for economic alliances which perpetuate peace. Conservatives who only have Fox news as a information source will tout this brash use of tariffs as a solution to returning manufacturing jobs to the US. Those jobs were outsourced to China and other Asian nations by Reagan, Bush senior and Clinton in concert with multinational corporations to make the profit 'huge' as one global village idiot might say, not Bush junior(though he qualifies as well) but the fake president now in charge. I have a linguistic issue with the term 'Pax Americana' to describe a global world economic order. The term 'Pax Romana' described the so-called Roman 'peace' by imperialism and fascism. They ruled the known world not by economic agreements but rather deadly militarism and war. The US does this as well by building a dominant military force, proxy-wars(with Iran in Yemen), veiled threats of militarism or bribing leaders of other countries. If US can't fake a good reason for war, they will invent it as was done in Iraq and Vietnam. They then we have 'Regime change' or fighting communism to justify an ongoing imperial occupation. It is not just economic exploitation we derive from that country's resources, but also multinational corporations in the US and the 1% make billions in profits on war spending through the military-industrial complex(Halliburton Corp made hundreds of Billions of dollars on Iraq). Iran is our next war to help Trump's rich corrupt friends.
1
All I have to say is that I'm glad that Krugman is not in charge of anything in the government.
I prey for nuclear war. Humans are incapable of sustainable living, we consume like a locust plague.
Has anybody noticed the screaming irony that this administration sells the American people the idea of supply side economics for the good of the country for tax policy, but believes that consumption side economics is decisive for purposes of a trade war. This clearly exposes as a fantasy that supply side economics is of any value for macroeconomic policy. We certainly can’t tax suppliers at a rate that is exorbitant. But, we are very far from that rate currently.
1
So, Paul "the markets will never rebound" Krugman weighs in on Trump's trade policy. (Of note, the "Seer Krugman" admits to a "bang for the buck" from the 2017 tax cuts. STOP THE PRESSES!!) While I humbly hesitate to take exception to any thought expressed by the "Seer," I feel the need to point out that his definition of democracy needs adjusting. The leaders of Poland and Hungary are quite expressly reflecting democracy in their respective countries, as, it appears, the citizens in England are about to do.
1
Aren't you the same Paul Krugman who predicted that Trump would ruin the economy as soon as he took office? The Pax Americana was based on the reality of overwhelming American power, economic and military. It can only be maintained by continued economic and military dominance. Getting out in front of "world opinion" while waving a baton is not leadership. Determining the outcome of world events is. If we continue to allow China to benefit from bad trade practices, currency manipulation, theft of industrial and military secrets we will no longer have the economic or military power to maintain Pax Americana.
1
Remember when Krugman warned us all of the stock market disaster if Trump were to be elected? Yeah, right. If Kriguman's against it, Trump must be doing the right thing...again.
1
Neat commentary on tariffs/
Worrying implications are developing. Having failed with North Korea, Iran and China which one is is he shaping for another distraction r? Or will he give Putin the go ahead in the Ukraine when anyone of the "difficulties" from legal matters starts to gain traction. Or the GOP regains its conscience acknowledges its Russian finding (thank you Ruth May) and recovers from its greed quest, to pursue him for any one of the things he has done to make America unsafe and uncaring.
Sure, trust the worst business loser in history to "fix" our trade issues with China. What could go wrong?
Mr. Krugman believes Trump's lack of knowledge about tariffs is the reason we are stuck in this trade war. But it takes two to tango. He avoids talking about China's part in the stalemated. Some of the issues agreed on in preliminary talks have been abandoned by China. How smart does he think China is? They were supposed to have just a few things to finish. Difficult but able to be work out. Mr. Krugman throws in the claim that Trump embrace of foreign dictators. Has he not read Sun Tsu. Keep friends close but your enemies closer. Many were predicting he would give Kim a deal that did nothing just to say he got a deal. He didn't. Now he standing back when China comes to the table reversing what had already been agree to. Mr. Krugman may not understand that this is not just about tariffs. China demands company secrets to allow us to open up manufacturing plants there. They are accused of trying to steel trade secrets. There are issues about the knock offs they produce. It sounds like Mr. Krugman thinks we should allow them to charge high tariffs while we keep ours low and end up closing our own plants. Trump could have gone along with the Chinese change of heart and signed the deal just to get a deal He didn't and we have other countries we can buy from. We could also turn around and start making things here. Apparently, they are still negotiating so there is hope. But we shouldn't sign anything that keeps the same imbalance but just described it another way.
1
The speak loudly and wave a big stick approach to foreign policy is very popular among a lot if people who describe themselves as conservatives. The silly trade war is an implementation of this idea. There's no need for a wealthy country with a strong military to behave this way.
Perhaps this thinking is too deep. Why can't this just be a simple case of market manipulation? Market tanks due to tariffs, President Trump (or his designee, he's not that dumb) massively buys on the downturn, then some time later the tweet comes in: "Hey, we won the trade war, the tariffs are over!" Market jumps, nice windfall for President Trump. I believe he would explain that "this makes him smart", as with his other unethical behaviors. Seems more straightforward and in-character.
Add to a teetering trade war with China a near future, hot war with Iran and Venezuela? What could go wrong with an unchecked President with absolutely no impulse control?
1
From his own experience Mr. Krugman should be very careful about the predictions he makes, after sounding so many false alarms in the past.
1
Superb column.
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As wrong headed as Trumps trade wars are his moves toward hot wars are even worse. Trump has effectively declared war on Venezuela, Cuba and Iran.
We have not yet done so against North Korea because they have nuclear weapons, a fact that may not be lost on other developing nations.
But as a carrier battle group speeds to the Persian Gulf ready for a first strike against Iran, who in congress represents the average American citizen?
Our last Middle East folly was built on lies. It cost nearly 5,000 American lives, tens of thousands of wounded, and estimates of 6 trillion dollars that our grandchildren will still be paying for. Have we learned nothing?
What is Trump's proposal for a new treaty with Iran? Answer, he doesn't have one. All he knows is that Obama negotiated the last treaty so it must be bad.
Why have our congressional representatives become so complacent and so timid about foreign affairs?
We have been at war for 17 years, and for what? Oil contracts in Iraq and a pipeline deal in Afghanistan?
Wake up America. Tell your members of congress that they and only they have the authority to declare war. And if they want to do so then present their case to their constituents and we will tell them if we are convinced.
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I wonder if sarcasm and one upmanship, however intense, will ever help to create one job or for that matter, win over one person to the other side?
1
Pocks Americana, according to the White House
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I think Susan Rice’s (President Obama’s NSA Advisor) recent NYT op-ed applies to this newer, harsher tariff on Chinese imports.
There is no coherence in his foreign policy, until you consider her key insight: “...upon closer examination, there is indeed a consistent logic staring us in the face. The unifying theme of Mr. Trump’s foreign policy is simply to service his domestic politics.”
He isn’t leading; he’s running for re-election.
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@Jane III: There's no coherence to appealing to single-issue voters.
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Mr. Trump’s tariff war was predesigned by ideas of Adam Smith’s – division of labor and expanded to international division of labor coupled with practices of globalization. Our industrial captains with assistance of elites of political and economic practitioners and intellectuals dismantled American production base. China was elected as the main productive engine and extensive capital investments (including American ones) followed. Now, the significant part of low income population in US is vitally dependent on goods coming from China and other low wages countries. The economics of this symbiosis of Chinese low wages producers and American low wages consumers is hidden and is not recognized and appreciated by these consumers, who are majority of Mr. Trump cheering masses filling sport arenas. Mr. Trump’s populist cry “America first!” is contrary to capitalist aims at lowering costs of production. As raw materials and finished goods are bought on global market at global price, the main instrument for cost reduction is reduction of labor cost. If you watch TV reality show ‘Shark Tank” you will see that the Sharks’ first question to the seekers of their money is: Have you considered to move your production out of US?’
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@Gene Kane -- "the main instrument for cost reduction is reduction of labor cost."
Yes, and therein lies a tale. It is a capitalist imperative to lower costs as much as they can be. Everyone knows this and accepts it. They negotiate the lowest possible price for raw materials, equipment, transportation, utilities, etc. Their ideal is, obviously, to get everything for free. Any company would love free iron ore, free desks, free computers, free paper clips.
Naturally enough, another cost that is kept as low as possible is labour. Thus negotiated terms with unions, then abolition of unions in general, then lower health care benefits, overtime, vacations, etc. Ultimately the goal is free labour. There's another term for that, but that's the ideal in unfettered capitalism.
Not sure how that relates to tariffs, though.
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@Stevenz
AKA Comparative Advantage.
"low IQ" Trump is the biggest loser in iRs tax history. thrown out of normal high school and unwilling to share his gpa. We know he has no conception of economic policy.
While we have serious IP issues and national security issues with the Chinese "Low IQ" Trump is most concerned with a win. And his perceived standing among tough guys aka Putin, Xi, Duerte, Sisi...
Providing analysis on why Trump misunderstands. Keynes, Smith, Marx, Friedman ... Is unnecessary . What is more interesting is why "Low IQ" Trump is embraced by farmers and small business who he is hurting.This analysis and how "Sleepy Joe" Biden or any other Dem will be able to be effective advocate to this segment of critical "Low IQ" supporters is the column i am in need of.
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Paul Krugman: Right on the money, as usual.
(Pun also intended...)
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It is obvious to most that the actions taken by Trump have diminished the stature of America but that erosion started decades ago. So much has been forgotten and even more has been marginalized, but at one point the US did think in longer terms. Now a blowhard with no imagination can tap into the frustration and anger and resentment of a certain sector of society and may possibly destroy the labor and foresight of generations of Americans past.
The dividends that each and every US citizen has reaped from a concerted effort to strive for peace and unity across the planet cannot be understood because generations do not know a world without this stability. That we can so willingly believe that we, the most powerful, wealthy country, are regularly being taken advantage of is an obscene lie perpetrated by those that actually front for the abusers.
Manufacturing left because corporations could get the same job done for cheaper and government let them. The hollowing out of this industry was touted as a benefit though anyone could see that it left vast swatches of the country underemployed. It worked for a bit as cheap products made it seem we were doing the same when actually little by little the wealthy were taking greater and greater percentages of income.
Trade imbalances, immigrants, US mistreatment, liberal elites, moral decay, homosexuals, abortion advocates, etc. are all a ruse by Republicans to confuse their constituents into seeing who really hurt us. Simple greed
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Malevolent democracy? 2020 can hopefully right our course. Provided we don't have another hacked election. Unless we are already toast compliments of Senator McConnell and his court packing operation.
Trump has claimed the title, "Tariff Man," a kind of treacherous superhero---in his own addlepated mind. But his degree from Wharton, one of our nation's finest business schools which he evidently slept through--his older brother had a buddy in its admissions' office and go him in and then daddy paid for it--failed to help him grasp the economics of tariffs. It's a further
subtle editorial observation that the person who doesn't read is just as uninformed as the person who can't.
2
I got more than half way through the article, picking up the well worn points you'd expect of a classical economist.
But this isn't 1750.
The problem Trump is allegedly addressing to his audience is the massive loss of domestic manufacturing jobs. This segment of the economy gives the working class people of the US a chance to survive. Their ancestors worked in factories and heavy industry, and didn't have to feel like a second class citizen as they do now.
The point is that we need to get manufacturing back in the US and reverse decades of moving it offshore. Trump is not very sophisticated, so he is forced to use a blunt instrument (tariffs) to go after China. May or may not work. But I agree wholly with the idea that a Communist police state that imprisons millioms of slave workers is NOT the "comparative advantage" American workers should be pitted against.
The President and the Congress jointly have the power to prohibit the importation of finished goods from China, or any other slave-state country. Thats the correct weapon to correct this situation.
WE ARE SUBSIDIZING TOTALITARIANISM by importing finished goods from China.
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Krugman is wrong again, just like he was when he predicted massive recession when tariffs were first announced last year.
Tariffs would be taxes on consumers IF companies did not move production away to another country on which the US does not place tariffs. There are literally dozens of these countries, and manufacturers WILL shift production to other countries like Vietnam, India, Korea, Bangladesh, etc. -- all of which are democratic, non-authoritarian, non-bully countries. Tariffs are also a way to get China to respect intellectual property and open its economy to the west.
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@RSSF: It takes time to relocate factories, and moving jobs from China to Vietnam, etc. probably won't affect employment in the US.
1
@Steve Bolger The US will never make most of the products made in China here. So while you're right that shifting production to say Vietnam rather than China will not directly affect jobs in the US, if we get China to respect our intellectual property or import from countries that respect our IP and open their markets for what we do produce, yes it will affect the value of what we create (the US today largely produces IP rather than goods).
3
@RSSF: In practice, trade secrets are the only effective IP in manufacturing. This is why England did everything possible to prevent its advancing textile technology from being transmitted to its cotton-picking colonies in America. When the factory moves from China to Vietnam, the trade secrets go with it.
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Very perceptive analysis as usual. Mr. Krugman, I wish you a nice holiday and not getting too depressed by these bleak political thoughts.
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When I read Paul Krugman's comments, I am reminded of those who make the weather then complaining about the storm.
I don't disagree with Paul Krugman's assessment of the malign nature of Donald Trump's decisions. His game is entirely political and playing to his base; nevertheless his criticisms of China have merit. Frankly speaking, he is the first President to even bring these issues up since William Jefferson Clinton opened the door to China's explosive economic growth.
What Dr. Krugman fails to do is also comment on the reasons for the election of Donald Trump. How is it possible that such an individual could gain the Presidency? The primary is not racism or White Nationalism. Those hold some sway but are basically acts of misdirection. The primary reason is a failure of leadership by the Power Elite of this Nation. Since the Age of Reagan this country has not adequately invested in its own future. The Democratic Party having been sold-out by the Clinton faction to the Finance Industry is every bit as guilty
The "Masses" who the Power Elite so disdains have come to a reasonable conclusion that the existing Power Elite has failed the long term interests of the American People. Trump is a form of revenge. Manny Ramirez's comments reflect on what are viewed as a positive effects of Trump's policies and serve as a real warning to status quo Democrats: "Still a Democrat (Moderate) at heart, but my vote is for the person who brings the jobs."
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@Rick: Don't blame Clinton for something initiated by Nixon and Kissinger.
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@Steve Bolger
Yep, and to which JFK (long before) tried to allude before being silenced.
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@Steve Bolger
Absolutely blame Bill Clinton.
Blaming Nixon and Kissinger for normalizing relations with China is an act of misdirection. The Chinese economy at that time was very small and inconsequential. It grew dramatically and its exports to the United States rose into the 100s of billions of dollars during the Clinton years.
I certainly blame Clinton for the Financial Services Modernization Act of 1999. Even Alan Greenspan criticized the bill as written (check it for yourself by reading the Congressional Record). He described it as creating "too big to fail" financial institutions and cautioned that the American Taxpayer would bail out those institutions. It is right there in a letter from Greenspan to John Dingell and is part of the Congressional Record on July 1st 1999.
Perhaps you support the re-election of Donald J. Trump.
1
We can only hope the the rest of the world, watching us from afar, believes that Trump is—as I believe he is—an accident of history.
We can only hope that the example and leadership set by the United States after World War II can re-light the way to peace and economic security and once again serve as an example to the rest of the world.
Trump, and all the politicians who aid and abet his crazy, destructive behavior need to be swept from office. They've taken us into a long, dark tunnel of fear and loathing—of each other. They must go.
5
You can't sell these idiotic ideas without sound bite marketing to the masses, and the propaganda machine of Fox is the key partner in getting this to effectively drive Trump's base. I'm not sure what's more malign, the GOP or Murdoch's Fox, but the perfect alignment of the two has tilted everything possibly beyond repair with the senate and courts falling in line with the presidency. An upside down world of un-American evil.
5
The people who listen to Trump and support his bizarre and destructive trade practices (they aren’t policies, that involves thought) are the people that will be most hurt by them. They are also angry and emotionally tend to a victimization mind set, which is very Evangelical Protestant. They seem to be people who cannot move with the times as well, as the coal miners. People who either don’t read or only listen to Fox News. They were either too lazy to get retrained for other jobs or thought, strangely, that whatever was happening in the world didn’t apply to them or maybe, they would be taken care of or subsidized. If my job was threatened, I had to get further education or a different job, I couldn’t just stay where I was and not do anything. Although Trump has done that all his life, with a few lawsuits and bailouts from dad thrown in - and, as always, lots of lies.
3
And yet, we are still not adequately ensuring everyone in the US is educated to their highest potential. We keep looking back instead of embracing the future. Our insane debate over women’s contraception rights & climate change will lead to our downfall. Xi is a dictator & I do not agree with many of his policies but the Chinese are educating & encouraging their people to succeed in the 21st century. We want to believe they are all slaves but I worked in Shanghai and that is far from true. They are moving forward & we keep looking back to the 50’s....all that has given us is a population of workers stuck as underpaid Uber drivers & Amazon warehouse workers.
Hey Mr. Krugman as an Industrial Mechanic in South Florida. Never seen so many jobs in my field down here in a long, long time. I say this because I'm not a tariff expert but I like the fact that we the US are standing up for once when it comes to jobs. Oh I get it when people say we are ruffling some feathers with our trading partners. I guess that wouldn't be the political correct thing to do with China since it seems like a one sided deal over the years. I would only ask you in the future when writing to please consider guys like me in the big picture when it comes to free fair trade with our partners. This statement is not political only a request to you to please consider how great our economy is at this time. As a father of 3 recent college graduates, my wife and I were very happy they were able to get jobs in there field. My party affiliation used to be Democratic even after the 2016 election. Never imagined that President Trump would have us at I believe 3.0 or 3.2 GDP in 2 years. So what ever you think of this person I'm glad he is putting the American people back to work. Just seems weird that when it came to negotiating during President Obamas terms, who I voted for. Seemed like we were always giving away tons of cash or basically not demanding much from our counterparts. I'm glad that John Kerry is not negotiating anything at this time. Still a Democrat (Moderate) at heart, but my vote is for the person who brings the jobs.
21
@Manny Ramirez
The jobs have been coming back steadily since Obama's second term. Trump had nothing to do with it.
But the number of jobs in itself is not an indicator of economic health.
What matters is how much of a living one can make from those jobs, how many people have left the labor market and depend on others for their support, how much purchasing power people have, what kinds of benefits jobs give, and how much debt families are burdened under.
The relative security of you and your family and friends is not typical across the country. For example, the only reason individual filings for bankruptcy are down is that so many people are too broke to afford the procedure.
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@Manny Ramirez
You know not from where your benefits derive ... There has been nothing done by Trump to help you specifically but because you are doing well (although I suspect not significantly better than you were doing 3 years ago) you feel that justifies putting young children in cages, demonizing immigrants, upending the rule of law, and retreating from America's leadership role in the world.
As the only people that believe that Trump is achieving anything with his blowhard tactics are those listening to the propaganda arms of the Republican noise machine, specifically Fox News and its ilk in the right-wing media universe. As such, it's highly unlikely that you were ever a Democrat. You should just stop the ruse.
49
@Manny Ramirez
Manny, if anything is responsible for the continued improvement in the jobs outlook which, you will remember, began during the Obama Administration, it's the Federal Reserve.
Trump has, in fact, been trying to monkey with the Fed and may politicize it in the end—even though past presidents have stayed away from it—because he doesn't like their policies regarding interest rates and preventing inflation.
You cannot name a single thing the Trump people have done which has been beneficial to this economy. I, on the other hand, can give you numerous examples of Trump's actions which harm it, not the least of which is unilaterally slapping tariffs on imports.
Ultimately, this tariff tax will reflect on your buying choices.
37
I disagree that short term effects are passing or inconsequential. They are consequential to retirees like myself. When the stock market is roiled and drops like a stone my savings are impacted and as a result my ability to enjoy the retirement savings that I’ve accumulated over a lifetime of working. Forget about the $200 billion here and there, it’s the $2000 I need today to maintain my home, pay medical bills, and buy a (used) car when I need it. That’s what matters and it’s pretty clear the current admin could care less (as well as some of the commentariat today).
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@Gabbyboy
I'm with you in spirit, but you seem to be suggested the stock market deliver you a guaranteed range of return. It is always a gamble and should not be relied on for needed capital.
7
@Gabbyboy: What’s that buzzing sound? Ah, it’s the little people complaining again. Not to worry, we will just throw out “National Security” once more and they will quiet down that irritating buzzing.
7
@JBC Also, if they are retired they should be mostly in bonds and not stocks so the stock market dropping shouldn't really affect much.
2
The commenters who reflexively write that Prof. Krugman is wrong about trade may be implying that Mr. Trump is automatically right.
Searching the entire Krugman oeuvre wouldn't uncover anything nearly as...injudicious...as "trade wars are fun and easy to win".
The person who wrote that--for widespread distribution here and abroad--has, arguably, more power over the U.S. and world economies than anybody on the planet.
It would be nice for all of us if Mr. Trump felt this massive authority brought the responsibility to look at facts and examine at least the possibility of being wrong.
64
@Grennan and you seem to think that words stated in public by politicians are always designed to be a perfect summary of the issue. Not that you're necessarily alone in this view: countries like China, North Korea, Iran, etc. have been running circles around the West for decades precisely because we've tended to behave in a transparent and predictable manner, while they....didn't.
@Matthew Kilburn
Under Trump they are not only running circles around the US they are laughing to his face because Trump is so easily played due to his ignorance, gullibility, and inability to think straight.
2
@White Buffalo
2018 real GDP growth of the U.S? $680 billion
GDP growth of Europe? $210 billion
GDp growth of Mexico? $23 billion
GDP growth of Canada negative $61 billion
Running circles around us?
Maybe in some cultural dimensions.
What Pax Americana; there never was one. From the time English settled the American colonies, until today, what would become the United States has been at war externally and internally.
Let's start with Native Americans who have had every treaty broken, from day one, and forced to relocation centers we call "reservations".
Of course, there are two wars against the British. And, the English colonies against the French.
The "wars" against Native Americans went on most of the 19th Century.
Nor forgetting wars against the Spanish and Mexico. Then, the US was at war with itself, over slavery.
The results of the Civil War continue to this day, as Black Americans still have not gained equality.
Of course, let's throw in the war against women, who too, never gained equality. This continues to this day.
Another example, trade wars of the 19th and 20th century. They stopped for a while, until Trump started up again.
Then there was WWI, and WWII, Followed by the Cold War, Korean War, Vietnam War, Gulf War, and now the so cold "war on terror".
The only time the US was truly was at peace, was a couple years during the Clinton Administration. That was the only Pax Americana which ever exited, and that was quickly dashed. The GOP took over the House, and began the war on the multi-party system
Trump is the culmination of nearly 400 years of constant upheaval. It began with the Pilgrims (English and continues today. Add another 100 years for Spanish and French America.
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@Nick Metrowsky You forgot internal wars with American Chinese, Japanese, and now muslims etc, etc...
9
Killing Pax America should come as no surprise to those who followed the Trump Primary, where his biggest “boast” was that he, as a successful businessman’ was going to run the government with the same acumen and skill he brought to his private businesses.
Well he is most certainly following through on that promise, particularly in the area of accumulating debt, which to anyone who followed Trump at all prior to his presidential run was well aware of the fact that he was “The King of Bankruptcies,” and stiffing his creditors was his chief stock in trade.
Now he is in the best position ever, he can and probably will destroy the “Full Faith and Credit” of the American dollar,
88
Krugman is merely saying that the US is not any longer leading western nations in a constructive alliance of the many. The US is now acting out its "indispensable nation" complex which seeks to use war and sanctions to dominate every nation. Why should other nations sign up for US hegemony? Indeed why should US citizens sign up to be fodder for the policies of unaccountable politicians?
168
@WJF Answer 1: US hegemony has been very good for other countries. For over half a century our policies and economic power has brought prosperity to many. Answer 2: Sounds like that's what we're doing internally. The Executive branch claims absolute power over the Legislative branch, and radical-right judges and justices promise to do nothing to stop the destruction of the system of checks and balances dictated by the Constitution.
182
@Larry Bershtein
American hegemony has been good for a few of our allies but bad for much of the world. Latin America and the Middle East have been largely stagnant since the 1950s, and Africa only started posting decent growth in the 2000s. Just today, Cuba started rationing food because of US sanctions. Compare this to how China treats its arch-rival Taiwan, which is a prospering country that is allowed to have many investments and business ties in China.
16
@Aoy
American workers have seen stagnant wages for some 4 decades.
During this time the rest of the Worlds workers have seen their wages increase from a few pennies per hour to a few dollars per hour.
American workers wages increased from $1.10 an hour to 9.00 an hour at the minimum and maybe closer to $17.50 an hour for the average working wage.
3
As more information comes forward from NYT and elsewhere-- Trump appears to be running the economy much as he has run his businesses-- unfortunately the US does not have a wealthy father to bail it out when the bill comes due
214
@Rebecca
No, no wealthy father--but we can print money as needed.
2
Disruption and chaos have always worked to his advantage ... and everybody else's disadvantage. And will continue to.
Today's NYT piece "My cousin was my hero until the day he tried to kill me" is a synopsis of what awaits the Trumpsters.
2
The Republican Tariffs are wealth distribution at work. Billions of dollars of wealth is being redistributed from the working class to the rich with the purchase of every taxed foreign product and over priced domestic product. Elections have consequences,
217
@DWS The biggest falsehood promulgated by Trump and many of the (mostly Democrat party) politicians who opposed NAFTA and other trade agreements is that America has entered into terrible trade deals. This is particularly dangerous, because so many people who are now vehemently opposed to Trump appear to have bought into it. The exact opposite is the truth. The USA may not be number one in everything, but we are definitely number one in negotiators and lawyers.
If two foreign countries, say Brazil and Argentina were in a trade related dispute, both sides will usually hire American negotiators and lawyers. One tactic the USA has used to get the upper hand in trade negotiations was to use American women to do the face-to-face negotiation. Many foreign cultures were unused to dealing with women at that level. This gave the USA an additional advantage when negotiating the trade deals, that made America the worlds' largest and strongest economy.
It is distressing that many leftist protectionists like senators Bernie Sanders and Sherrod Brown (D-Ohio) were so quickly able to go from complaining that trade deals like NAFTA and the TPP were examples of corporate America exploiting the workers of the world, to agreeing with Trump's false assertion that the trade deals were one sided against American business interests..."
https://seekingalpha.com/article/4205253
1
Mr. Krugman states that "...trade policy isn’t just about economics. It’s also about democracy and peace." True enough. But much of President Trump's appeal to his supporters is based on his inchoate anger, and a belief in zero sums: if you're winning, I'm losing. People are angry about global economic policies; they're angry about lost jobs and depressed earning power. And President Trump, with his malign rage, is a proxy for that frustration.
Most of us agree that China engages in unfair trade practices, and that the problem must be addressed. But never mind that tariffs will ultimately hurt the United States more than China. We're angry, and someone has to pay! This is the same thinking that fueled our invasion of Iraq. Never mind that Iraq had nothing to do with 9/11 - those Arabs and Muslims are going to pay! Pointing to facts and statistics won't change President Trump's mind, nor his supporters. Because this trade war isn't about economic reality. Like everything about President Trump, it's about rage, perception, and telling his supporters what they want to hear.
285
@Raul Campos and jrinsc
Let's not forget that American Corporations outsourced all their jobs to China and elsewhere in a relentless search for cheap labor and higher profits. Hence the hard times for the American working class.
This point somehow got lost in the Fox Propaganda in the lead up to the 2016 election. Blaming foreigners and "unfair" policies was easier to sell than the reality that wealthy Americans were to blame. No one forced them to move their factories overseas. It was their greed - which Americans of the President's ilk have been told is "good".
Let's see how long this "boom" lasts and whether Trump really cares about his supporters.
78
@Raul Campos
If Hillary Clinton wouldn't show her taxes.
If the Clinton campaign had all those contacts with Russians.
If the Clinton campaign had tried to set up a back channel with Russia through the Russian embassy in DC.
If Clinton believed Putin in Helsinki over the National Security advisers that Russia didn't meddle in our election.
etc.
Trump supporters would be saying lock her up.
Oh, wait, they already are saying lock her up.
37
@Raul Campos Yes they care about the economy along with their hatred. But unfortunately the Trump supporters care nothing about the future of our country and human society as a whole. We are burning the candle at both ends in order to have a booming economy. In the end, human society and the entire world will pay far it especially our children and future generations.
25
The most important point of this article is summed up in the last paragraph:
"Trump is malign. He’s working actively to make the world a more dangerous, less democratic place, with trade war just one manifestation of that drive. And the eventual negative consequences for America and the world will be much bigger than anything we can capture with economic modeling of the effects of tariffs."
And I ask myself, is there any possible explanation for such behavior other than he is in the service of Vladimir Putin and Russia?
Who else benefits from the destabilization of Western democracies?
Who else benefits when America alienates and punishes its allies?
How does any of this make America great?
Democrats see this. A majority of the American public sees this.
But the Republican Party does not.
Draw your own conclusions.
369
@Richard Oh,
Republicans see this all right. But the RNC was hacked by the Russians as well as the DNC. McConnell and Graham are especially Russo-phile. Wonder why?
38
@Richard In the short term the Russians are winning. Why do you think they supported Trump? They knew he would weaken the United States. But in the longer term all of us will lose even the Russians as we destroy our environment that will almost certainly cause terrible consequences for life on our planet.
36
@Richard
The conclusion is clear and can be summarized in a short sentence:
Vote out all Republicans in the next decades!
47
I'm a big fan of Paul Krugman.
As usual, this op-ed speaks truth. The USA is losing respect in the world hand over fist, and our trade policies are only one of the causes, on a par with the support of dictators all over the world by the current mis-administration.
457
@Han Broekman
This isn't the first administration to support dictators all over the world. The whole concept of "Pax Americana" is a self-serving delusion. Just ask innocent people slaughtered in Vietnam or Iraq or Libya. Or those who suffer due to our machinations in Latin America. In many ways, Trump is the proper face for our policies, including Obama's policies.
4
@I want to leave this planet Yes, our hands are not clean and we have a long way to go to live up to the idealism that founded this country. But until Trump I thought we were, hands down, a better alternative than any other major player - EU, Russia or China - in leading this world. However, Trump and his supporters have demonstrated all the worst characteristics we have as a country. And the biggest problem is that 40% of Americans (Republicans) don't care.
24
@Han Broekman: I'm a big fan of Paul Krugman.
Really? Remember this?
"The economic fallout of a Donald Trump presidency will probably be severe and widespread enough to plunge the world into recession, New York Times columnist Paul Krugman warned in a New York Times opinion piece published early Wednesday."
That was on November 9th 2016
3
Incredible that no one around Trump can get through to him how tariffs work. It is a very simple construct. What does it say about him that he can't even grasp something so simple?
531
@DanO What's to explain? DJT is the World's Smartest Man.
34
@DanO - Trump's short-term thinking is purely political. Will his base like the idea of "sticking it to the Chinese?"
Yes. Will it hurt them? Of course. Will they figure that out? No. They'll blame Democrats.
154
@DanO
I think he understands how tariff works; it is his followers who don't get it and buy his lies.
27
There's a child driving a sports car. He knows next to nothing about driving but he knows he wants to go to Disney World. Half the adults in the car want an adult to drive so they can go to the grocery store. The other half, who want to go to Disney World, and think it's funny that the others are so freaked out, continue to let the child drive. It's a 50-50 split so the kid stays in the driver's seat. Remarkably, despite a few close calls but the car hasn't crashed yet. The kid is having fun. Vroom vroom. The adults continue to argue while a curve comes up in the road.
1
When we allowed China entry into the WTO, it was with the understanding (or hope) that they would embrace democracy. Now, that has been proven to be wishful thinking. What do we do? Their behavior as a trading partner or a democracy has not been good. China's 2025 agenda, built on stolen technology from around the globe, should have been a red flag. It's past time to trim their wings. Do we really want the next holder of the worlds reserve currency, the dominant world power, to be a dictatorship? In the meantime, what will happen is prices will be cheaper coming from somewhere other than China. Could be Vietnam? Central or South America? (Or the US, in some cases). Supply chains will shift away from China, as they should. Industry can respond rapidly. China holds very little IP that originated there. Hopefully, China will see what's happening and change course.
1
@Steve: The US still selects presidents under a system that established liberty to enslave, and now we are governed by a psychotic with a global death wish elected by an algorithm written by the dead. Isn't it time we put aside the pretense that this system is a real democracy?
3
@Steve Bolger Hate to break it to you my friend by the U.S. has never been a real democracy nor pretended to be. It is a Republic. And really be thankful it is a Republic and that we still use the "algorithm written by the dead" that is how Bill got elected (plurality not majority) and thankfully how Hillary didn't get elected (single worst candidate the Dems could possibly have thrown out there).
It is unfortunate that the "hot button" rhetoric" of Trump's campaign rallies covers up his ignorance of issues which do injure his base voters. If Trump/Republican Senate can't manage timely disaster aid to American citizens, there is no hope more complicated economic concepts will be understood by them.
The disgrace of the lack of sensible post-hurricane aid to the Florida Panhandle where housing, food and other basic needs of life are still missing is allowed to be covered up by Trump when he sets up a sham competition between the Panhandle and Puerto Rico. Notably the generous aid to Houston and Central Florida is not mentioned.
For those of us who were astounded that any 2016 voter believed--and continues to believe--Trump is an astute, accomplished "businessman", the mess he has made of economic policy confirms how unfit he is to be president.
3
Trump is making the world a more dangerous place partly out of ignorance but also because he knows that what he’s doing benefits the uber wealthy. Simply his affection for Russian Oligarchs writ large.
1
Why no mention of the macro-economic impact of the theft of U.S. intellectual property? Exactly what I would expect from an ivory tower academic who never invented anything.
4
@Kalahun: That's certainly an issue, but not the most important issue in the world. It's great when an individual gets rewarded for an invention or creation, but on the corporate or national level, trade secrets aren't a valid basis for an economy. This has been demonstrated repeatedly over the last couple of hundred years.
7
@bergstrom
What? I’m quite sure you are not seeing the issue of intellectual property in the proper light: it’s a huge issue. I have many friends in the tech business with patents etc.. who are very concerned about the Chinese copying there ideas/ technology. As well, many well respected people in the big tech world would wholly disagree with downplaying the issue. Not to mention the technology transfer laws and money policy manipulations the Chinese have stacked quietly on their favor for literally decades.
Tariffs in Trade wars are one thing— one can count pennies and agree that it’s just like taxes. Big deal, and thanks PG, most folks could figure that out. But we agree it’s not just about taxes, and most who follow this sort of thing know that too. It needs a more public understanding/ press and there are few options to achieve that besides a “trAde war”—- Unless of course you and others feel it’s ok to take a back seat and let other countries disrespect ( I.e. steel) the hard earned work of others.
2
@Kalahun
I am being somewhat sarcastic, but from the other countries' point of view, isn't it a form of payback for all the American meddling in their internal politics and the raiding and exploitation of their natural resources?
Our love of the almighty dollar and insatiable need for fossil fuel have been the motivating factor in so many misguided, sad and tragic choices in the Middle East.
2
"China is neither an ally nor a democracy"
"Ally" and "democracy" need reconsideration--which actually supports Krugman's Pax Americana point--peace order and good government regarding world trade.
1. Don't confuse "competitor" with "enemy'--China is certainly a competitor--both economic and political. But China is not an enemy--that's a "zombie idea" from Cold War and "Bush war"-days "Not with us is against us."
"Trade war" is inflationary/inflammatory--regarding tariffs/taxes--but also hostility. Like sports competitors--economics competitors can cooperate at a more fundamental level--agree to compete by the rules of all sorts--product safety, environment, worker rights--on and on. Without the rules--it's Hobbesian war.
2. "Democracy" is a propaganda word. US government is Constitutional (limited/liberal), Federalist (decentralized), Bureaucratic (multi-branched), Procedural (due process, multilevel review/appeal), Majoritarian. It is not "people rule". Nor is China.
And which government is more FOR the common people is TBD. Government by the GOP, certainly isn't. And speaking of "regressive taxes"-- my (many) Chinese students complain that "Everything is cheaper in China!." Their educations are more Chinese foreign policy but also more Canadian trade.
Trump's macho "policy" amounts to more cheating competitors, workers, contractors and "teammates". It's more micro/macro fallacy. That may have worked for his business; he thinks it will work for the country.
1
@Michael Kubara To be clear, it never worked for his companies. The only business/economic theory that has worked for him is the greater fool,i.e. there is always a greater fool out there to borrow and/or steal from to get what you want when what ever you did last eviscerates in a mass of fraud and criminal incompetence.
is trump really this ignorant, or is he somehow making money on the situations he is creating?
1
One might wonder: "Why does Trump want to be president? Seek a second term? Especially now that it seems quite possible that he - and his family - may be guilty of serious crimes and prosecuted when the worm turns from Republican hegemony.
Tariffs on friendly neighbors - and unfriendly - human rights violations - and legal violations - at the border, the "Wall," cozy with Kim Jong Un and Vlad, down on NATO, start a war with Iran? It's reality TV, situation comedy?, "The Price is Right" - we know all about that - distraction.
But that distraction's even more important for Trump now who has legal tiger by the tail and can't let go. His only hope is to use what power he has to further pervert the course of justice and the rule of law. Once he has no influence left to peddle, he's dead in the water.
Netanyahu is seeking the support of the national-religious Right Wing Union to make his prosecution illegal. (That's an interesting twist: A law to be illegal.)
Maybe Franklin Graham will cut a deal with Our Savior to save Trump.
We will know we are in trouble when Dollar Tree raises it price from $1 on everything.
Just might be the best Climate Change policy coming out of this administration. Put a stop to all international trade. Slow economic activity - slow greenhouse gas emissions.
@Bird Time!: The incidental pollution of container ships:
https://newatlas.com/shipping-pollution/11526/
Trumpian economics is an ill conceived and poorly constructed version of malignant economic nationalism and ignores the reality of the global economy with many American based multinational companies and the benefits of American leadership financially and economically of it. His trade and political wars not only will fail but will harm American leadership of the world and will lead to a gradual lower standard of living around the world. To create better jobs in America will require changing the current capitalistic model which his own recent tax cut rewarded and increasing government investments in infrastructure and new industries like solar and wind, economic policies which he and his Republicans ignore and scorn. In short Trump’s
trade policies are ignorant, incoherent, and just destructive to American interests and won’t create any good jobs now or in the future.
Krugman on Trump:
If the question is when markets will recover, a first-pass answer is never.
Under any circumstances, putting an irresponsible, ignorant man who takes his advice from all the wrong people in charge of the nation with the world’s most important economy would be very bad news. What makes it especially bad right now, however, is the fundamentally fragile state much of the world is still in, eight years after the great financial crisis.
Reality on Trump:
Stock market regularly breaks and re-break all time highs, trade deficit with China hits 5 year lows, unemployment better than half century, 700k manufacturing jobs back, tax revenue collected at all-time high, millions off food stamps, personal finance confidence at all time high, massive improvement from Obama, red states growing faster than in 35 years, fake media companies laying people off, Trump approval rating at all-time high (and higher than Obama at this point in his presidency).
I hope the country learns that it’s better to listen to people who accomplish great things than people who pay no price for being wrong.
1
Because we buy so much from China, the net effect of the tariffs is the equivalent of a VAT. In other words, Trump is enacting a national sales tax with the money pouring into the Treasury. What is not collected is collected by US competitors who can raise prices to increase profits. The state of ignorance in this country is breathtaking. SAD!
3
The USofA is losing goodwill all over the place. Not only is the world agape at how the american people are unable to react against an obviously and blatantly lying and ignorant president who is increasingly holding the world at ransom for his personal twisted views of politics and "truth", but also how large numbers of americans seem unaware that something fishy is going on.
For the american people to keep and protect a president who is doing nothing but hollowing and tearing down all conceptions of decensy and positive cooperation, and creating a showcase for how someone should pull through doing the opposite of what is making the world a better and more durable place, is an unbelieavably sad thing to see.
I have visited the USA, and will again - if I am not denied a visa after this - and I have an idea and an experience that the country is full of polite and good people, and that the grassroots of the country probably will survive even a series of such presidents.
But why take the pain from even this one?
1
Trump and especially the Trumpified GOP are a clear and present existential danger.
To us as an egalitarian secular Nation based on principles of liberal democracy and individual liberty certainly.
But add to that - to us and the broader World. On all fronts - ecological, environmental, economic, political.
Also to our scientific modernity - where facts, truth, eclecticism trump fantasy and mysticism.
Add to that the proven drivers of our otherwise weak species's success are under attack and disrespected.
The premier factors empathy, cooperation, diversity dissed.
The less important overwhelming strength and aggressiveness exalted.
Why even Christianity is under attack by the Party of the supposedly devout that strip away the social compassion and progressiveness of JC and rather emphasize the punitive, aggressive, restrictive, and reactive in their "good book".
It is NOT that the GOP or even Trump is "always wrong". It is not that the Ds are "always right". There is enough normal incompetence, narrow mindedness, and stupidity to go around on both sides of the aisle. That is not the point.
Today we are at an existential battle for our survival as a modern liberal democratic Nation.
It wasn't about who could incrementally be better at building autobahns, striking a better armistice, curbing inflation, unifying to a common language, getting the rail system in shape.
It wasn't circa 1930 and it isn't now. It is existential and the only choice now is D!
The GOP base and the fans of Trumpian politics either never learned to think through the issues of simply choose to ignore that it wasn't the Federal Gov't nor the Democrats who moved all the blue-collar manufacturing jobs to countries with low wages, e.g. GM jobs in Mexico.
Why do these folks think a multiple-bankrupt NYC real estate developer has their best interests at heart? Trump wouldn't spit in their mouths if they were dying of thirst. PT Barnum must be laughing in his grave.
2
@GTM career politicians beholden to big donors sold out the american worker long before Trump . Trump is no more ridiculous than Sanders , Obama, Bush, or the Clintons. PT Barnum must be laughing that we givie career puppets the reverence that they certainly don't deserve.
trump is a mercantilist. mercantilism was the prevailing economic theory prior to the adoption of capitalism. it held that when it came to trade what ever was good for the other country was bad for yours. it also advocated the accumulation of gold as the ultimate goal. some thing that trump also holds dear. capitalism and the trade theory of comparative advantage put an end to that foolishness and so with the publication of the wealth of nations and the declaration of independence in 1776 the US and the western world as a whole were launched on an upward trajectory towards greater wealth and equality for all people. now trump wants to drag the US and the rest of the world back, not just to the 1950s, but to the centuries before 1776 when most people were feudal serfs governed by autocratic rulers. the republicans have long claimed to be the true defenders of capitalism but they are not. the republicans have long since abandoned defense of capitalism in favor of political power at any cost and the transfer of wealth back up to the top 1 percent through policies that more closely resemble fascism than anything else.
Thanks for your thoughts, well balanced, in an upside-down world...made worse by an unhinged brutus ignoramus in the White House, seemingly unperturbed at the notion that economic wealth is dependent on solidarity, sharing the pie more equitably...instead of a zero-sum game (you win, they lose, and viceversa). And more just; without justice, peace shall remain a distant dream...while Trump is adamant in stupefying our potential for good and everybody's bonanza. I know, Europe could, and should, do more to shame the Viktor Orban's authoritarian nonsense; but then again, no one is perfect; or even less than that, as long as we have an ugly bully in the U.S., so arrogant within his ignorance, acting as if owns the whole enchilada (the poor guy, dethroned from a billionaire status to a mere millionaire, un-self-made by his father's largesse and at our expense). No Pax Americana here, AWOL really.
The U.S. has been at war during its entire existence. We're at war right now. There has never been a "Pax Americana."
1
"But where the Europeans are weak, Trump is malign. He’s working actively to make the world a more dangerous, less democratic place, with trade war just one manifestation of that drive. "
Indeed, Pox Americana.
1
Although some might quibble and consider it insignificant, this Fake President’s gathering, distressing attempt to politically hijack the traditional 4th of July celebration on the National Mall, basically converting it into a Trump rally, evinces his “malignant”, anti-democratic mindset. This grotesque vanity project, in celebration of his narcissistic self, hopefully will be thwarted by a popular resistance and by local governmental interference. To the extent that he believes that our own beloved civic traditions and rituals can be subverted by him, it is unsurprising that his malevolent reach also extends beyond our shores.
Pursuit of inequality by Winning all the Poker chips is game
Survival of the fit
Humans are animals
Too many humans foul our nest
Any ideas?
1
What you're basically saying, Professor, is that Trump is prepared to destroy the world in order to dominate the news, keep his base fired up and be re-elected in 2020.
But one phrase I totally disagree with: There has never been a Pax Americana. the phrase is a misnomer. It has been Bellum Americanum since the end of WWII. You have done nothing but kill foreigners, discourage healthy eating habits with junk food, and destroy the climate.
Sorry, but I call it as I see it.
2
Yes. Trump is malign.
He has no idea what that word means.
I do.
He is.
1
You gotta love Paul Krugman for working and providing us continued nourishment while on vacation! I had been dreading the two-week hiatus. What will he write on the the beach?
Most comprehensive analysis that conjoins multiple disciplines I have read in some time.
"Trump is malign..." Why don't Republican Senators and Representatives, who went to college and many of whom are lawyers, get this? Sure, McConnell and some others may also be malign, but not all of them. And they allow themselves to be bullied by the NRA, while they probably teach their kids, "When you recognize a bully, stand up to him". A sense of personal honor is what seems to be lacking.
1
I hope that the necessity of working together to confront climate change will promote international cooperation in multiple areas and reduce conflict. It might be the only good thing to come out of the climate emergency. We are all in a very leaky vessel and, to paraphrase Benjamin Franklin, "We must all bail together or we shall all drown separately." (Or roast, or die of thirst, depending on location.)
As to Trump, he's the lunatic who's screaming at the top of his lungs and trying to kick holes in the boat.
2
Don't worry Paul. If we speed up our demise with a global war that will likely go nuclear that may be better than the slower and more painful destruction we are reaping via climate change and species extinction. We seem universally incapable of dealing with the world we have created.
1
Trump has institutionalized the de facto collapse and moral failure of democracy. Few emperors have been supporters of democracy. Most empires have disappeared and of the few that remain they are empires in name only, such as Japan. Trump is our Caligula.
2
Everything he does is only to benefit his and his 'family.' Furthermore, we no longer manufacture the kinds of goods that China has been crankig out.
So here in the US: no infrastructure and no more factories (or very few....) And as a person who has been teaching at all levels for a very long while, the large majority of my university students have no clue or experience about Manual Labor. (BTW, is he one of those migrants being turned away at the border......) Remember los Braceros during ww2? We will be needing them again soon.
The racists don't care about this now, but they will in the future.
While I understand what Dr K has posited here about Trump's wrongheaded "policies", he is falling into the trap. Trump has no coherent policies. The China is a bad trading partner line got great applause at his campaign rallies.
This ignorant approach to trade is just another shot at a ratings boost among the 37%.
Trump Inc used cheap Chinese textiles for profits. Are we to believe that Mr. America First has suddenly gotten real religion and now will forgo cheap knockoffs in favor of buying more expensive American made Trump-trinkets? Think again.
2
The 45th killing Pax Americana and by extension, America. One brick at a time.
This would be ingenious if it weren’t so fundamentally ‘destructive’.
Even KGB and MSS (China) combined couldn’t have come up with a better plan.
Bravo, ‘patriots’ !
2
Trump is a malign force for America and the world. Resentment and suspicion of foreigners are powerful in America. Trump appeals to the insecure and simple-minded who believe they would be better off if other countries are humiliated and made to suffer. Trump's list of enemies includes Canada and Mexico (NAFTA), the EU (Merkel, German cars), India (H1B visa holders), Iran, and China. Apart from the effects on American consumers, Trump's policies run the risk of a bloody nose in Iraq where Iran has significant influence and forces on the ground. Even when Trump has gone, it will take a long time to restore relations with China, which may retaliate not only with tariffs on American exports but also to destabilize financial markets by dumping Treasury bills.
2
Trump's view that the trade deals are all bad is because of the way he views deals in general: somebody has to win, somebody has to loose.
A deal that is mutually beneficial, as Trump sees it, is a losing deal. If the other guy is getting something out of it too, it means you're giving up something. That makes you a loser because you didn't get everything you could out of it.
To make it even dumber, Trump is famous/notorious for making really bad deals. He'll settle for looking like he 'won' when he lost - and then he'll lie to himself and the rest of the world about it.
That's why he's so bad at negotiations. Flatter him, make him feel like he's doing you a favor (and making himself look big), and he'll fall for anything.
Impeach now, while it's still possible. He's not going to get better. He's going to keep pushing, because that's all he knows how to do. Ditto for the rest of the GOP. They all must go.
3
That Trump panders to his Fox News misinformation-fed base is a given, but perhaps that support will erode as the damage of his policies to it accumulates. Even then, though, this may not change Trump's narcissistic 'us versus them' world view. I can think of one regime in particular that delights in his despot-friendly, allies-crushing behavior - Putin's Russia. He would be more than happy to see the collapse of Western alliances.
But why the Republicans in Congress sit on their hands still baffles me. I know Dr. Krugman has some ideas why, yet buying into them fully is just too depressing. Are these people so obsessed with maintaining their power, or so tied to the money that supports it, that they'd be willing to sit back and watch the world crumble?
I often think that the world is in the grip of some sort of global psychosis, fed by a host of uncertainties over what the future might bring, which will push it to a horrific conflagration. And, what is even more horrific, ultimately we are powerless to stop it.
2
@GLO. President Obama signed the multi-lateral TPP which was a major advance for our interests in Asia. Trump stupidly reneged because he won’t let anything President Obama achieved. President Obama also supported and was ready to advance major immigration reform legislation, but the Republicans in Congress thwarted that.
5
@J. Where do you get your information from? The TPP was far from a major advance of our interests in Asia - my gosh even Hillary bashed it. Trump was ready to do a deal on immigration including Dreamers, Dems killed it.
"the long-term consequences of what’s happening are bigger than most people seem to realize." This applies to the entire spectrum of chaos and lies of Trumpism! Astonishingly, Trump just repeated that China is paying the tariffs and not a single Congressional Republican commented. Trump never ceases to demonstrate that he is unfit and unqualified to be POTUS. As aside, separate from trade, the Trump rally where the crowd of MAGA yelled to "shoot the immigrants" revealed just how ugly Trumpism is and suspect it is only going to get worse!
1
Trump's trade war against humanity is what happens when an abject failure in the business world works to model the country in his own image.
Americans must hold themselves accountable, because we were the ones foolish enough to elect this disaster.
3
I do believe President the Donald is playing his Apprentice Show Game and has been at least since, if not before, Day One in the White House
How else does one explain the ever changing panels of contestants for Executive branch jobs and Corporate visitors?
Of course he doesn’t understand anything mentioned in the article. He's playing Fast Eddie the pool shark at the international Poker playoff series.
Meanwhile M. Krugman, enjoy your croissant and coffee. I guess there is no International Herald Tribute anymore.
And that is exactly why Trump can legitimately be referred to as Putin's asset.
2
“Trump is malign.”
In this Triple Crown season of horse racing, I’d add Fox News and Senate Republicans to form the Malignancy Trifecta.
Tragically, they’ve infected 40% of the country.
1
Vile men like Donald Trump tend to be aggressive and cynical. They are not bound by the same rules and norms as their opposition, so it is difficult to fight them effectively by being less aggressive and being constrained by rules and norms.
It takes a very healthy and assertive media, for one thing, to make it a fairer fight. Too bad they have fallen so far short. The way the media bow to Trump and his fellow propagandists is almost as pathetic as the way Republican politicians have prostrated themselves before Trump. I'm waiting for at least one Welch-McCarthy moment of direct confrontation.
1
"China is neither an ally nor a democracy"
"Ally" and "democracy" need reconsideration--buttressing the Pax Americana point--peace order and good government in world trade.
1. Don't confuse "competitor" with "enemy'--China is certainly a competitor--both economic and political. But China is not an enemy--that's a "zombie idea" from Cold War and "Bush war"-days "Not with us is against us."
"Trade war" is inflationary/inflammatory--regarding tariffs/taxes--but also hostility. Like sports competitors--economics competitors can cooperate at a more fundamental level--agree to compete by the rules of all sorts--product safety, environment, worker rights--on and on. Without the rules--it's Hobbesian war.
2. "Democracy" is a propaganda word. US government is Constitutional (limited/liberal), Federalist (decentralized), Bureaucratic (multi-branched), Procedural (due process, multilevel review/appeal), Majoritarian. It is not "people rule". Nor is China.
And which government is more FOR the common people is TBD. Government by the GOP, certainly isn't. And speaking of "regressive taxes"-- my (many) Chinese students complain that "Everything is cheaper in China!." Their educations are more Chinese foreign policy but also more Canadian trade.
Trump's macho--kiss my finger--"policy" amounts to more cheating competitors, workers, contractors and "teammates". It's more micro/macro fallacy. That may have worked for his business; he thinks it will work for the country.
Krugman gives us a completely irrelevant history lesson about Pax Americana.
It is irrelevant for the reasons he gives: "But wait, you say: China is neither an ally nor a democracy, and it is in many ways a bad actor in world trade. Isn’t there a reasonable case for confronting China over its economic practices?"
Pax Americana and the global trading system have completely failed. Their weaknesses have been mercilessly exploited by China. US appeasement in face of China's repeated violations of the spirit and letter of the rules have only fed Xi Jin-ping's Chinese imperialist dream. The chances of war are ten to one hundred times greater now than when Obama took office.
Krugman almost admits this, but then he checks himself and descends into the usual incoherent rant about how malign Trump is. He lost me, what about you?
It is amazing the stupid things people will say in order not to have to agree with Trump.
3
Yes, all you say is true.
But here is the silver lining. We have become addicted to cheap shoddy Chinese made goods, clothes, doo dads, what no. Our homes are trash bins, so are our garages and sheds. Has anyone seen the inside of our closets, kitchens, basements, attics, storage bins lately?
Anyone heard of Madam Kondo? She says curate your home like a museum. I am okay if we have to pay more for trash so we make sustainable decisions of about owning everything, consuming everything, and dumping plastic and other ungodly things everywhere.
If prices escalate, and we stop buying, that is not a bad thing.
There might be good, desirable externalities to the absolute callous, know-nothingness of Trump. Americans are nothing if not adaptive and innovative.
"But where the Europeans are weak, Trump is malign."
I think "malignant" is a better choice versus "malign."
A "misbehaving China" is making its own global economy. The "Pax Americana" was racist and imperialist, and assumed that white males would dominate the world forever. Strange that Dr Krugman agrees w Trump that China is "misbehaving" and supports the racist, imperialist myth of "Pax America", too.
Trump's intransigence to negotiate wisely - via a coalition of nations to pressure China - as well as his outspoken ignorance of how tariffs work, may all be part of his clown car act. Perhaps he is throwing yet another tantrum on the international stage simply to divert attention away from the endless stream of subpoenas for his financial records, the indictments of many of his closest advisors, and growing evidence that he is a charlatan at best, and a crude mob boss at worst?
2
Pax Americana begins at home
From the original Thirteen Colonies emerged a new nation. When a new nation emerges that new country must abide by the accepted mores and the conditions set by international law and the established treaties of peace and trade between already existing nations.
The rise of an American empire and "In God we tru$t" was never intended by the founders of this nation. The original motto of this first truly free democracy was "E pluribus Unum", adopted when the Great Seal of the United States was created in 1782 defining a Union of States putting an end to colonialism and foreign rule and which in no way intended to give sanction to a confederacy of independent fiefdoms; land surreptitiously gained by conquest and maintained using human trafficking by landholders posing as humanists. Let a statue divide us, or a religion, or the color of one’s skin, or one’s family origin and cherished kin, and we will have broken the bonds of God’s own grace that we are one world granted this short opportunity in time to coexist peacefully, prosperously, and honorably to credit what we should become given time.
We are all united and blessed by this nation’s strength and historic respect around the world. Sadly watching our fall from grace it has to be said, it’s not just the economy “Mr. Trump” or “Stupid" if you wish to choose a more appropriate echo from the past.
As an example of how extremely dangerous Trump and his party are, they risk world war to dominate the world economically, the opposite of Hull's idea of using economics to keep the peace. Trump is a real live devil.
Pax Amerlcana has meant 17 years of failed war and hundreds of thousands of dead Muslims. Krugman's Hillary criticized Obama for not being even more warlike in hopeless areas. Trump is extraordinarily dangerous. He is ending these wars.
Trump’s strategy is based on we won in Korea, we won in Vietnam, and we’ll win in China
"But where the Europeans are weak, Trump is malign."
True enough. But as malign as Trump may be, America needs to face up to another fact: No aspect of his being exceeds his incompetence. The rest of the planet realizes this.
Since the fall of the Berlin Wall--and hence the former, de facto Soviet Empire, Putin and his cronies wanted to re-establish Stalinist stability. They studied America well--and knew our Constitutional, governance, economy, and mindset better than 90% of Americans today.
As a result, they saw a GOP more interested in rewarding their corporate and individual sponsors, permanent political power, and money than service to their voting constituents and their state and the Federal Constitution. They saw a narrcissistic, economically-needy candidate who was never really rich (but, bigly, a fiscal loser, as the Times discovered). It was a perfect match in creating chaos to wreck America and its hard and soft power.
"until a few years ago it seemed to me that we were..... transitioning from largely benign U.S. hegemony to a comparably benign co-dominion by the U.S. and the E.U."
Game over, Paul.
A significant percentage of Trump supporters have been brainwashed into believing globalism IS the enemy. They consider the UN and WTO to be enemies of patriotic Americans. Some of these people keep their guns loaded waiting for black helicopters.
For those of us who live in rural America it was bad enough before. Now they have a cheerleader in the White House.
You're talking about a man that will say or do anything because he has a pathological need for adoration. A man who, just a few days ago, came out in support of InfoWars.
Tough luck America. A room full of cheering ball caps comes first.
1
In practical ways and outcomes, the benefactor of Trump's deliberate malfeasance, malevolence, antics and ignorance is Vladimir PUTIN. Anybody notice that yet? Trump benefits dictators, gangsters and their organizations.
2
Trump's base ignore your arguments. They imagine most politicians are ignorant of technical details. But Trump is different. He doesn't listen to specialists. He surrounds himself with people who are afraid to correct him. He picks his staff almost exclusively on "loyalty", not competence.
Members of his staff who might challenge him are fired. In the beginning of his presidency, there were cabinet members who tried to protect America from Trump's whimsical impulses. Those people are now gone. Most dictators, Hitler, Kim Jong Un, Putin and now Trump isolate themselves & their country from the rest of the world. They have paranoia and hatred of outsiders. They mismanage their power to the detriment of both themselves & their country. Their country slips into a police state. Trump becomes another oppressive dictator.
3
Well, let's see; he's ignorant about everything, thinks he knows everything, doesn't care about anything or anyone but himself, and is in the most powerful position in the world. Sleep tight, America.
3
Naturally it is all about HIM. VOTE!
2
I would imagine that Russia likes the US/CH trade war. Putin wins again.
2
I know somebody who needs a vacation. But wait, you are on vacation. Free yourself as much as possible from the daily crisis mode president. Let your mind be caught up in things not Trump. Contemplate the origin story of that croissant you are eating. Drift away to mental images of the vistas you encounter. In short, take a break. We need you bright eyed and well rested when you return. Oh, by the way, send in a few pics and don't try photo-shopping yourself into something to try to fool us.
1
trump is in a perpetual state of emotional upheaval. His every action and word will either mirror that emotional state or stroke a damaged ego. Though he basks and grovels in their company, he is not in the strongman mold of a Putin or Xi. At best he is humored yet encouraged as the weak sibling he is. He's a sociopathic wannabee.
Economic chaos is just one of the tools in his chest of enmity. There is no solution to this trade war. It's not possible and if it were he would't let it happen. He is mentally unbalanced and will always manipulate to create external turmoil to match.
Contrary to the common misconception of his adoring fans, above all other creatures, he hates himself the most.
2
It may just be time for a new version of ‘Pax Americana’, but one that is based on facts and pragmatism.
But this ‘bull-headed approach’ guided by fake news and conspiracy theories galore is only a sure-fire way down ‘epic failure’ lane.
Another win for America’s enemies.
3
Does Professor Krugman remember that tariffs financed the federal government until the early 20th century when the income tax was implemented? The problem today is that US policy has created a pear international competitor in China and
continues to allow China to game the economic relationship with the US. Does Professor Krugman have a strategy with associated tactics to address this situation?
@wes evans It is true that tariffs did finance the government.
However, those businesses that lobbied for favored trade status with China are reaping the fruits of that lobbying and we the consumer pay for that egregious error.
We the consumer continually seek the "lowest prices-always" then blame the businesses when that satiate our thirst.
The solution? There is no one solution.
1
Again, Trump is only the symptom of the underlying problem. To paraphrase Clinton, "it's the system, stupid." American Democracy acts exactly as it is expected: opposing camps fight it out for power and parties spend as much money as they can collect to win the popularity contest. The voters have spoken. Same happened with UK's Brexit. In many ways it's like an insidious latent virus finally flare up into a full blown attack.
1
My friend Steven grew up in Brooklyn, where his mother worked for a lumber company that, at least for a period, did business with Fred Trump, Donald's father. She had to go to Trump offices in 1936 to review books. There she saw larger-than-life pictures of Hitler and Mussolini on the wall.
Trump's love of dictators has deep roots.
3
@William Lazarus. And, the first of trump’s wives stated that he kept a book of Hitler’s speeches on his bedside table.
It seems to always be the same: Professor Krugman writes an insightful, if somewhat repetitive column about the malign stupidity of the Republicans and the comments voted highly with recommendations are inane observations about Trump. Not inaccurate, just obvious, and pointless.
2
imagine our modern world, with nuclear and biological weapons, and many other weaponizable threats, with no global consensus on how to behave, and every nation vying to dominate others. imagine endless world war with millions of casualties. thats the world of trump, putin, xi, duterte, modi, brazils guy (BRIC is now solidly neofascist), and all the islamicist nations. not much hope for democracy and peace now.
2
image Donald Trump as being someone else's head of state - how quickly do you suppose many of you stop doing business with him ??
character matters and you know it.
1
As of when was there a Pax Americana? In 1994 Osama bin Laden appears on the scene only three years post Soviet. WW1 ,WW2 ,The Cold War, The War On Terror, World-Wide Trade war? And you say DJT has killed the Pax Americana? It never existed.
And how ‘bout the OAS? Where’s the Pax Americana there? Good thing we don’t have to worry about NATO or ‘Old Glory,forgive me’ , Africa. Correct. So better get Baquero? Forget about it. Better get out and vote. But we better think hard , study long , and then decide.
He is only for himself, not the Country. Alliances? Fugeddaboutit. The Presidency was a toy surprise in the Crackerjack box for him, so why not leverage it to his/family’s advantage? Unfortunately his track record shows that even when great advantages are handed to him, he manages to squander them. And the people who will continue to be most hurt are those in his base. The Republicans will hold their noses and try to use him to push through their regressive agenda. The rest of us need to get out there and protect the social safety net, the environment and the rule of law.
2
Everything Trump touches turns to dreck. YOu really
have to try to lose so much money as he has.
He has destroyed the Country destroyed the Constitution
and is wrecking the world.
Imagine if someone in his party stood up for the Constitution
NAH
4
I propose the title should be: “Trump-Pox Americana”.
1
"He doesn’t know how tariffs work, or who pays them ." Of course he knows how they work, or course he knows who pays for them, he just can't say that out loud. This is definitely one instance where lying helps Trump. He's going to say out loud at his rallies "You're going to pay for the tariffs"? He's going to say out loud at his rallies "It's actually a tax on you"? Of course he knows all about tariffs and has to lie his pants off.
1
It is difficult for me to express the anger I feel this week as I again read in the NYT that the President elect of Ukraine Vlodymyr Zelensky is an unqualified tv celebrity as was Reagan and now Trump. President elect, Zelensky's Wikipedia entry indicates a man whose wisdom and integrity make him an ideal candidate for the leadership of the World's liberal democracies.
Pax Americana has become being forced to swim in a fetid cesspool of lies and distortion. I once thought our Prime Minister might fit the role of leader of the Free World. He has been a better than OK Prime Minister but he lacks the wisdom and moral clarity to lead a world gone mad. Our Foreign Minister Chrystia Freeland and New Zealand's Prime Minister Jacinda Ardern seem to both possess the understanding and moral clarity and I have no problem with President elect Zelensky. I like the entire Democratic field to begin to extricate the USA from its bottomless quicksand but it will be a while till an American will be fit to lead a world going mad.
Pax Americana is pretty frightening but Gerere Bellum is a whole other level of fear.
https://en.wikipedia.org/wiki/Volodymyr_Zelensky
1
@Montreal Moe - Well Moe, we all know that Wikipedia is the font of all knowlege. With regard to your PM, I had the pleasure of living in Canada for a while, and found you Canadians to have a great sense of humor, so I'm assuming that you are jesting about your PM.
Always enjoy, Prof. Krugman’s articles. For me, simply put.....Donald’s trade war is posturing, chest pounding, an insecure man pretending to be “tough” because he is so ...afraid!
Unfortunately, We, the People will be the ones paying for the tariffs because China is no fool! Don’t believe me? Ask the spy bean farmers of the U.S. how the tariffs are working for them! Donald has to bail them out with ....$1.7 BILLION in hard earned tax payer $$$$$!
Republicans hate socialism unless it’s about helping their base, corporate America or their billionaire overlords!
4
Trump's whole approach to life rests on his belief that he will always come out on top in an "Me first!" situation. The US really has stepped off the planet behind this jerk.
4
God help us!
2
Trump is so unabashedly and obviously self-serving that it's a total embarrassment to even realize that I belong to the same species as him. He has the moral compass of a 2-year-old baby. He makes me feel like taking a shower every time I hear his voice, see his face or think about him. Even snakes and spiders don't creep me out as much as he does and I hate spiders.
10
An interesting article on trade and tariffs and a clear warning that critics of Trump should not over estimate their impact and leave the voters skeptical of their claims. But the Pax America arguement while accurate may suffer the same. Much has changed thanks to Hull and others since the thirties. The economies and cultures of the world are globally knit and Trunp's stupidities will have little effect except on the image of America as the vanguard of history. Truth is while the knitting has proceeded that image has been eroded by America's successive and failed wars since W.W. II in the name of its exceptionalism and in its advancement of plutocracy here and around the world.
4
Sir, despots/ idiots have one one goal : Power. Their operating system : slash and burn. Slash any competition, Burn any obstacles, to the ground. The results are unimportant, and easily blamed upon the “ enemy “. Rinse and repeat.
It’s really that simple. And simple-minded.
5
Nothing of what Trump has done during his term n office has made a lick of sense.......unless it all gets understood as a whole; a million paper cuts to bleed The USA dry. Trump was put in office by a hostile foreign adversary to ruin America's ability to function.
In this he is getting a grade A+
Trade Wars, Treaty Nullifications, Race Baiting, Firing Federal Judges, Ambassadors and Security Heads, Insulting Allies, Creating Chaos at the Border, Enabling Dictators, Wrecking the Environment, Inflaming the Wealth Gap, Clouding Truth and Facts, Establishing Precedents that Wreck American Democracy's Future.......
Trump is peeing in every well, pouring sugar in every gas tank, dropping a monkey wrench in every gear, dropping a banana peel at every ledge. There will be little left once he's done.
8
Put simply, Trump is all about burning things down. Agreement with Iran? Kill it. Climate change accord? Nyet. Obamacare? Do away with it, by any means necessary. Cabinet posts? Fill 'em with sworn enemies of their putative mission. TPP? Dagger through its heart.
Hitler mesmerized Germans with his vision of the Thousand Year Reich. By the time he killed himself in his bunker, Germany was a smoldering ruin, after 12 short years under his control.
Look at what our very own fuehrer has wrought in under 2.5 years. Hopefully we and the world can avert the fate that Hitler delivered to the German volk when he promised to Make Germany Great Again.
11
This is all broadly true although Krugman perhaps underestimates the effects of trade wars on specific sectors of the economy. He mentions agriculture but there are others. There is also collateral damage in areas like financial markets which can have a depressant effect on the broader economy. He's also wrong in saying that the EU have ignored Orban. They have mounted a variety of soft sanctions against him and at the end of the day he knows which side his bread is buttered. Hungary is roughly 11 million people and his heavily dependent upon financial aid from the EU. Ultimately Orban is going to have to be dealt with by the Hungarian people who one has to say have a somewhat suspect historical record.
3
No one, not even the Condo Salesman in Chief, thinks tariffs are a tax on the Chinese. (Well, maybe HE does, but no one else.) Tariffs are a way of increasing the price of Chinese goods to make them less attractive. The goal is to make Americans buy less of them, and to help American producers compete with them.
@Green Tea But it is an utter failure in that goal. Take the case of tariffs on washing machines. In theory, the tariffs should've made American washing machines cheaper than their foreign competitors. In reality, the American companies just raised their prices up to what the foreign machines sell for with the tariffs, as a profit grab. Resulting in ALL washing machines becoming more expensive for the consumer.
9
@Green Tea
Unfortunately for your theory it's much easier and more profitable in the short term to pass the tariffs onto consumers or industrial users and then switch to other low cost manufacturing countries in Asia who enjoy comparative advantage but are not subject to the tariffs.
4
Yes Paul, we moved from the Pax Americana to the Trump Pox Americana--a virus infecting the entire global community from anti-environmental policies, to destroying the Western alliance while cozying up to Vladimir Putin's Russia, and now a global trade war not just with China, but Canada and the European Union. As to the effects of the trade war with China, I, a student of the late Nobel laureate Herbert Simon, must emphatically disagree. As Simon demonstrated, the psychological effects typically dwarf and upend the predicted economic effects. When you're talking about 40 percent of global trade, the human behavioral effect multiplies the economic one as people, especially investors, start over-reacting. Markets slump, loans are called in, defaults rise and the chilling effect is again magnified. And suddenly, the economic shock coupled with Trump's huge tax for the wealthy that emptied our Treasury and the rollback of Dodd-Frank financial regulations may put us back to 2088 all over again.
5
Today is the 70th anniversary of the day when the Soviets quit the blockade of Berlin after a yearlong effort of the United States and allies to supply nearly three million citizens of the largest German city with everything they needed via the Berlin Air Lift. It was the first big achievement, and maybe the last, of the Pax Americana. But at least we kept trying to keep the peace as we understood it ever since. Until what turned out to be the Trumpists came to power and began systematically to undermine the multilateral efforts to which millions of young Americans dedicated years of their lives and for which thousands made the ultimate sacrifice. RIP Pax Americana?
5
I never hear where all this new tax (tariff) money is going. Is it making its way to the general government coffers, to a fund to address the deficit, to military spending increases (probably), or into the pockets of Trump and company? It’s very fishy, and is never discussed. Just the continued fleecing of the US taxpayer?
7
@Christopher. The trump tariffs are actually regressive sales taxes on the trump base to partially offset the massive, budget-busting tax cut primarily benefiting trump and the “Republican” elite donors. Trump may receive advice for such disruptive policies from his mentor, Putin, who benefits from them, during their secret conversations. Trump’s base and Senate “Republicans” and Fox “News” support all of this for reasons of ignorance, devotion to the “Dear Leader”, thirst for power, or thirst for even greater wealth. It is amazing to watch this train wreck in slow motion.
It is an old maxim that history repeats itself, and part of that pattern of repetition is the process of evolution, which is nothing more than change predicated upon the past.
One of the errors of Marxism is the dogma that the past simply ends up in the dust bin. Marxists stubbornly claim that there is an inexorable march of history towards a triumph of the proletariat over the leaders of capitalism.
It was inevitable that Pax Americana would change, and Paul Krugman is right that the expected and welcomed change was to be the expansion of Pax Americana to include our European allies, whose prosperity we have worked hard to encourage.
We saw the symbiotic benefit for friendly competitors, so long as the basic agreement existed in the need for a liberal democratic world order.
Donald Trump and Vladimir Putin see things differently. To them, as well as to the tinpot autocrats in Europe and elsewhere, prosperity is a zero-sum game. Nationalism is on the rise, just as it was in the 1920s.
10
I don't understand Paul Krugman. Every week, he delivers a fawning analysis of President Trump - without fail. Always positive, always complimentary.
Yes, unemployment is down. Yes, the stock market is up. Yes, the NATO countries are finally upping their defense spending.
So what?
President Trump can't get millionaire athletes to show up at the White House to visit after winning a championship. These are the things that matter.
Please, please Mr Krugman, write something negative about President Trump. For a change.
@Maurice Gatien
Yes, unemployment is down ... following exactly the slope of decline it had been on for the last several years of the Obama administration. A quick trip to the FRED site will dismiss any doubt you might have about this.
Yes, the stock market is up from a combination of a wildly expensive tax cut that will be shouldered by generations to come and a wholesale attack on a regulatory system that protects Americans from harm and America's shared assets from being debauched.
And yes, NATO spending is up among a few NATO members. But how many of those NATO countries will be as quick to pull to America's side in the next inevitable international crisis?
Krugman is right. If you were to write fiction about a Manchurian candidate out to destroy a nation from within, you could couldn't best Donald Trump.
5
It's not a coincidence that Trump imposed his tariffs within days of speaking with Putin. The rise of China clearly poses a huge threat to Russia, and cutting off the cash stream from US multinationals and consumers is essential to slowing that down. If it creates problems for the US too, all the better.
Similarly, the threats to impose tariffs on German car imports make sense mainly as a means to split Germany from the US. Same with tariffs on products from Japan, Canada, etc.
Add this to the long list of Trump foreign policy moves that make little sense for the US but have obvious benefits for Russia--alienating democracies and failing to oppose dictators worldwide. None of our allies can rely upon us, and we repeatedly look weak (Syria, Venezuela) or actually support Russia-aligned leaders.
The reality is plain for anybody who simply looks at facts--our President is dependent upon Putin for his current status and his political future, and he's doing what Moscow tells him to do.
There will be a cease-fire in the US trade war with China when China cuts a deal with Putin.
16
No mention of currency? The China tariffs began in March 2018. Since then the dollar/yuan ratio has soared - It's now about 10% higher than it was on April 1, 2018. So the price effects of tariffs are completely nullified. In contrast, US goods in China became 10% + tariffs higher. No wonder 2018 saw the trade deficit with China soar by over 10% relative to 2017.
The lesson from this failure is that currency rates matter. The kind of manufacturing jobs that would become available at 6 yuan per dollar (relative inflation adjusted) are educating jobs that add value to the workers. That mfg ability makes the US more robust, and also more useful to the rest of the world.
2
@Craig H. Most U. S. trade with China is in Dollars so the Chinese selling company gets the advantage of the more valuable Dollar. The U.S. company pays the tax and must either increase prices or lower profits.
3
@Gregory Stidsen - Only for a contract fixed in dollars before the rate changed. And some products have their price set per shipment.
But the next contract after that will be cheaper for the US client (in US dollars). The Chinese companies calculation doesn't happen in dollars - exporters are obliged by law to deposit their earned dollars immediately in a government controlled bank which gives them yuan in exchange. China domestic costs, wages, parts, are all in yuan.
So the price for US consumers, in dollars, doesn't rise for the new prices. But US exports are suffering. People are vaguely aware exports jobs are dwindling, but day to day worries are about import prices - both for the more numerous businesses that depend on imports and for consumers.
So any president is going to feel more immediate pressure to keep imports cheap than worry about long term export related jobs. That's the paradoxical vicious circle we are being pulled down by.
Trump has proven to be incapable of solving this paradox. But so far I haven't heard anybody else directly address this issue. That's a shame because it's wasting a lot of human potential in our former thriving industrial areas.
It is time average Americans start saving .
With imposition of tariffs on Chinese goods , the only really cheap merchandise Americans are addicted to , Americans might decide that most of their consumerism is useless and will consider saving and paying off those terrible credit card debts.
This could be beneficial to families and detrimental to an economy based on spending.
10
It is interesting America had no problem doing business with China when it was abusing human rights. They stopped bringing it up. But now America has finally decided that China stealing its secrets is no longer acceptable. So unacceptable that it is willing to engage in a trade war. Does anyone think this is going to scare these human rights abusers? When you don't lead with values you are ready to be picked off and that is exactly what is happening.
2
Excellent—but I think Trump is being granted too much credit, when actually he’s just a rather lame front man for very predatory Capital that seeks to profit from a weakened international order (regression to the pre-1929 century, if not 19th century dreams of a new Gilded Age).
A thought experiment that would be fascinating to me is to consider how the legitimate problems of trade with China could be addressed with an intact international order: The Trans-Pacific Partnership in place, a strong U.S.-EU partnership in the WTO that could induce sustainable constraints on China’s avarice (and its violation of WTO rules).
A strong U.S.-EU partnership might have provided the global leadership that kept so much rightism from rising in Europe. In other words, the E.U. shares blame with Trump’s handlers.
Trump’s a perfect foil for backroom financial avarice: Keep the people focused on victimization by a Deep State, while the happy backroom rakes in short-term profits at the expense of economic health for the next president—which won’t be Trump; rather, another Democrat strapped with repairing Repulican era damage, which so constrained Obama.
19
Isn't it possible that the people and resources that would be employed to make steel and hence spans for the Bay Bridge in Oakland would not crowd out the Tech industry in Silicone Valley? Since Chinese leaders operate their managed economy to produce both without respecting the pious hopes of American Economists and Politicians, how is it singularly malevolent for Donald to want both for the benefit of all Americans?
1
"Isn’t there a reasonable case for confronting China over its economic practices?
Yes, there is — or there would be if the tariffs on Chinese products were an isolated story, or better yet if Trump were assembling an alliance of nations to confront objectionable Chinese policies. "
Well I credit Trump on bringing Krugman to say as much. Pre-Trump it was just all free trade free trade free trade, and that brought us Trump because it devastated middle American employment.
3
Not a single US president EVER, has understood economics. Most of them spoke like they understood. Some even professed wisdom. Politicians, all of them until Trump, who understands business AND politics. PK is correct, tariffs are political. Which is exactly why Trump is using them
1
The last paragraph is near the truth, I am not sure the Europeans are all that weak as the author makes out but what he says about Trump is spot on. Trump is dangerous and needs to be stopped before he causes a massive conflict that will not only cause economic and political mayhem but will quite possibly result in all-out armed conflict between the USA and some of her erstwhile friendly allies.
5
There is a lot of nonsense in this OpEd. Tariff are not just a tax - they are a tax directed at helping domestic manufacturers. As soon as some import is replaced with a product made in America, the tariff turns from a tax into a subsidy - that money stops going to the government and starts going to the American business. That business will supposedly use that benefit to invest and grow leading to more well-paying manufacturing jobs in the US. Being able to produce things domestically is strategically important and a matter of natural security – it is simply disingenuous to deny that. Secondly, while maintaining international peace and amicable trade is important, it is not something worth doing at any price or without regard to USA's own economic interests or without even trying to get a better deal for the US out of other participants of that system. American 'allies' took advantage of Pax Americana's largess for too long now – they cannot keep doing it when their security provider goes bankrupt. If it is so valuable, is it not worth finding out if everyone else could contribute a bit more to it to make it more durable? I think hatred for Trump clouds Prof Krugman's mind here.
9
@David, of course, that is true. But it is not a particularly efficient way to support American companies. And Trump's approach is to focus on dying sectors. Wouldn't it better to invest in future sectors (like China is!)? In much the same way that Trump is trying to promote coal over green energy, he is doing the same with old-style manufacturing over hi-tech. And, yes there are MUCH better ways to support workers than subsidizing companies and charging poor consumers for it. How about just giving money to workers s they change jobs?
10
I am more impressed by Donald Trump every day. Every move he makes, every policy he proposes, damages the progress our country has made since WW2. He has been able to do this with great alacrity in every sphere of American life: International trade, science, race relations, respect for institutions, the intelligence community, clean air and water, international relations and it goes on and on. No other individual has spearheaded this dismantling of our system of government before, so international trade is just a small part of this destruction. I don't want to give him all the credit either, because he could never have done this without Mitch McConnell, Rupert Murdock and the FOX propaganda machine. So hats off to them too. Donald Trump has managed to sacrifice the best interest of the 99.9 percent of America for the interests of the .1 percent. Most impressive of all, he has convinced more than 40 percent of America that he is the greatest president ever, while he does to them, what he did to Stormy Daniels. No one knows where this will end, but I fear it is not good for the 99.9 percent.
62
This part of Krug's piece cuts thru the fog like a fog lamp:
"Isn’t there a reasonable case for confronting China over its economic practices?
Yes, there is — or there would be if the tariffs on Chinese products were an isolated story, or better yet if Trump were assembling an alliance of nations to confront objectionable Chinese policies."
As a matter of fact, France and India recently joined in military exercises, quite independently of the US. Trump arrested a ship proceeding from Korea with a shipment of coal under authority of UN sanctions.
It's time that a progressive candidate like Warren steps up and moves to the right of Trump on China by suggesting that USA must and can marshall the forces of Western Democracy to combat Chinese malpractice in trade.
4
The solution to this tariff problem is to run down to Home Depot and whoever replaced Radio Shack and pick up the parts to needed build a time machine. Go back in time and convince the newly-elected Donald Trump not to scrap TPP but to rebrand it as Trump's Perfect Plan, possibly in giant gold letters. Since TPP nations represented some 40% of world trade, we would be in a much stronger position vis-a-vis China. I'm guessing we could even get some European nations to jump on board. There were flaws in the TPP, but it was a work in progress, and they could have been hammered out.
15
@jim allen. However, the idea would have been trumped by the Mitch McConnell racist idea of overturning everything accomplished by African-American President Obama for the benefit of the American people, so that it might appear in history that the Obama Presidency was irrelevant. In eight years, no one in his Administration was indicted, but his history of effective moral leadership is offset by the deep racism of trump and many of his co-conspirators and supporters that has a deep impact on the trump “administration”.
Forget the simplistic title referring to “Pax Americana.” IMHO, Trump’s trade policy proposals are rooted in early 20th century US trade doctrine, which was known as the “Open Door” trade policy, but the “Open Door” only swung in favor of US exporters.
We as a nation were able to dictate early 20th century trade policy since our primary contribution to the war effort was financing the Entente (AKA Ally) nations in their fight against Germany or the Habsburg empire (take your pick), which left the “victorious” Entente nations deeply indebted to US financiers and willing to concede to most of our demands. Why we failed to completely dominate the post war period could be the subject of a book; wait it is, “The Deluge,” by Adam Tooze, which I would recommend to anyone looking for a comparable period in American politics.
There is one major difference between the World Order as envisioned by Wilson and Trump’s vision for World Order, and that is Wilson envisioned the end of European Monarchies, substituted by a militarily impotent unified democratic Europe, which sounds eerily like the current EU situation minus NATO. But even Wilson had his own pre NATO plan where the US dictated the number of warships allotted to each nation. In a sense this is where Trump and Wilson visions depart; Trump wants NATO to build its own military and reduce the US commitment to honor our NATO treaties, which Wilson never considered and congress would never approve.
4
If you don’t like US companies moving off shore, trade imbalances, the gutting of America manufacturing, and the undermining of American workers to feed Wall Street billionaires.
Look no further than the political party that has been in power, the congress and senate for the last 20 years and created the policies and tax laws responsible. The Republican Party.
19
Trump sees every transaction as a zero-sum game, you win or I win. The idea of positive sum outcomes, win-win,is apparently beyond him. Oddly, since Adam Smith, the world has gradually, between wars, seen increasing and recently rapidly increasing win-win outcomes from the internet to space tech benefits to weather forecasting and earth science. From international air travel and shipping to cleaner energy sources, and in material goods and food more widely available. Much of this is the direct result of world trade and the world economy.
Now nationalists like Trump demand that we overlook those gains, put our little countries first, and build walls and tariff barriers to travel and trade, and strangle the golden goose of world commerce in the hope of getting just one more golden egg today. Trump sees only Chinese goods being sold here, not the what they buy, and the benefits of mutual commerce, travel, and knowing our neighbors.
He dreams of fighting wars and winning, a negative -sum game. Keeping peace is the win-win game. Remember our navy's 1812 slogan: "Free Trade and Sailors' Rights!"
6
I am struck by how many comments here see trade as a zero-sum game. It’s not. Many argue that the fact that the US is losing its capacity to produce can openers or table fans is a tragedy. Perhaps the US should focus on more advanced goods, that will actually make the country rich. Do you think that China wants to be a leader in ready made garments and can opera in five years time?
There are two real issues with China. The first to help the affected workers do something else. The second is the prevent China’s theft of America’s Intellectual property technological secrets.
7
"In general, people who actually work on these issues tend to assign them less importance than those who haven’t studied them closely."
Well then they missed something, didn't they?
How about the hollowing out of the American manufacturing sector, which in part is what gave us tRump.
4
You ever notice how all these sophisticated economists never seem to spill so much ink examining the complex subtleties of a cigarette tax in New York that makes Joe Blow spend $15 per pack, among a million such examples. The one thing this column has right is that a tariff is, simply, a tax. "Free Trade" is is a euphemism for using tax policy to subsidize an international community. If we didn't have a multi-trillion dollar debt, and therefore seriously need new sources of revenue, the issue would be less ridiculous.
4
Thanks to Paul Krugman for an illuminating article on the complexities of trade wars and the current political situation. I can now understand a bit what is a very complex interacting system. I’ve always been emotionally deeply affected by the wars of the last century. To understand the depth of horror throughout the world, the cruelty, the waste of life beyond one’s imagination and the Holocaust, is to value the peace promoting effects of the balance of power, politically and in trade.Interdependence promotes peace. Why do some powerful people not understand this, or even seem to care?
25
This commercial war began when the United States stopped making can opener, bottle caps and many other less important utensils, was when it opened for China to wake up and to enter once in world trade.In my opinion, it is already too late to stop the Chinese advance, and it will not be Trump who will, with his maleficent intentions, make back the sharp Chinese advantages. The best for the Americans would be to let China overtake the United States, and wake up the dormant American spirit, which has shown us incredible force in post war II.
5
@Romulo Frolini Junior:" and wake up the dormant American spirit, which has shown us incredible force in post war II."
But wasn't that force an imperialist force that was despised by Third World countries?
In capitalism no forces are appointed, they are absolutely gross, come from wherever it comes, the strongest wins.
1
Thank you for this timely analysis of current history, and the weakening of Cordell Hull's vision for a world order. Just knowing this history puts you light years in competence over the new leadership.
Clearly the system has been weakened, the U.S. market, wealth, and capabilities are an extremely important component of the system and I agree that the President is complicit in making "the world a more dangerous, less democratic place, with trade war just one manifestation of that drive. And the eventual negative consequences for America and the world will be much bigger than anything we can capture with economic modeling of the effects of tariffs."
Anyone who has any sense knows that for the world to remain stable we need to perfect the multilateral system for trade, economic development and environmental health, world health, and by realistically sharing the burden of responding to threats to Earth's soil, water, food, and wilding weather.
The global warming threat will require a multilateral approach. And the adjustment of capital to the huge economic dislocation of shifting the world economy away from fossil energy will require multilateral cooperation. In short, we need to strengthen our multilateral relations.
There is a lot of work ahead that will require leadership that understands the problem or at a minimum stays open minded about the problem and collaborates with World Leaders.
Hopefully, we can make it through the next 18 months.
Nature will rule.
13
Maybe this is how the long period European and American expansion, Colonialism and Post-colonialism finally ends, in a sad and bewildering downward spiral. Maybe Trump has no idea what he is doing, and maybe all of this is inevitable. And maybe it’s now time to consider living in a post consumer world.
13
Trump has been seeking to do business in Moscow for over 30 years, and during that time he's traveled to Moscow many times and met with Russian businessmen. He undoubtedly absorbed their strong sentiment that NATO and the E.U. must be broken up. This isn't just Putin's position. I'm sure he got to the point where he nodded enthusiastically in agreement with his hosts. He's a malleable guy who wants to please. These positions are new to us, but not to Trump.
12
So you do agree that trade war against China may make sense but you disagree on whether US should do it alone or with allies. This doesn't seem to be a crazy policy orientation by Trump considering that previous administrations were reluctant even discussing this.
Overally, I think it is useful that this administration initiated this discussion even in this immature and amateur way.
4
@Ted: No, the discussion has been going on a long time, Trump didn't initiate anything. There was a lot of opposition to the Trans Pacific Partnership, and it was never ratified by the the US, but it was exactly a plan to form an alliance of several concerned countries to resist the domination of China. This kind of alliance is probably certainly as important, probably more important, than simple tariff-based "trade wars". As PK points out, a tariff-based "trade war" is of less significance than most people think, even people who understand what it means. Trump apparently doesn't even understand how it works, based on what he says.
14
In this case, could we be the ones retaliating?
1
@rebecca1048: Sure, why not? Like in a bad relationship or a bar-room fight, the question of who is retaliating for what is actually of no real importance at all.
2
Nothing he says or does accurately reflects his motive or intention. For example, his relationship with North Korea’s strong man had nothing to do with North Korea per se. It had everything to do with his coveting the Nobel Peace Prize, which, as will be recalled, precipitated a call from the WH to the Premier of Japan who then sent a letter to the Nobel Committee seeking to nominate Trump for the Prize.
Even the “Wall,” had little to do with the wall. Immigration reform through legislation could easily and effectively reduce illegal crossings of our borders. It was clearly a dog whistle to his base, a reminder of his view of people of color as criminals.
What his foolish and painful tariff war is really about I don’t know. What it isn’t about-imposing hardship on Americans by imposing tariffs on Chinese goods.
Enjoy your coffee, Paul.
3
More nonsense -- Trump is aggrieved that China did not make good on its word in recent trade negotiations, but his word is meaningless. And he has made America's word meaningless. The USA is increasingly isolated: without allies and without the collective strength it took to implement and preserve an approximate state of peace. Trump's rendition of foreign policy is aimed toward his partisans, to the exclusion of the rest of America, America's allies, and the world at large (all species, not just humans).
16
Let’s be clear about what is going on here. The second Iraq War engineered by Cheney and Rumsfeld destabilized the World, particularly the Middle East, in ways that determined World History over the past 15-16 years. The destruction of Mid-East Countries and their treasures can never be repaired or replaced. The resulting destabilization of North African Countries added to the cost. The mass immigration into Europe created a right-wing (fascist) backlash that is both understandable and regrettable. The Cheyney/Rumsfeld destabilization opened the door for Russia to interfere with the Brexit and the USA 2016 election. World history is full of stupidities with long and vast repercussions over time. It is important to analyze them and understand them within their context.
40
In the end Mother Nature is going to be the final arbitrator if humanity cannot get the shortsighted greedy grifters of all nations under control. Gated communities, accumulated wealth, and privilege will not protect them from from the unrelenting onslaught against the systems that make life possible on this planet. Humanity has probably had one of the shortest run of any dominent species on the planet and probably the first to bring about its own extinction. That is where we are headed.
31
Thank you!
"When you’re imposing tariffs on imports of Canadian steel, on the ludicrous pretense that they endanger national security, and are threatening to do the same to German autos, you’re not building a strategic coalition to deal with a misbehaving China"
Bingo! I have been trying to explain exactly this to Trump supporters but they just. don't. get. it.
31
Elect someone who has no idea what he's doing, but who thinks he's an expert on every topic, and who lies - big time - about his financial acuity and his huge successes, and guess what? That's right; you've got a president who brags - brags! - about not paying his taxes like that's something to be proud of.
As a parent, grandparent, and teacher, I feel like such a chump. I've spent my life promoting honesty, hard work, and doing the right thing, which, incidentally, includes paying taxes to support the democracy that has been so good to me. What a chump I am.
And extremely proud of it! Hoping, too, that when this current national tragedy is over, we will choose to have a president worthy of the office, who will be proud to be honest, hard-working, and doing the right thing.
45
Just as he behaves domestically, Mr. Trump likes to disrupt and divide on a global scale. He seems to want things to fall apart. He would rather do things bilaterally than multilaterally. He seems to think Mr. Putin is quite the fellow, even as he snubs our traditional NATO allies. He recently planned to send Mr. Giuliani to the Ukraine to dig the dirt on Joe Biden's son, but then changed his mind.
5
Thanks for taking the time to reflect and write a column while on vacation, Dr. K! Sadly, your conclusions fit the overarching picture of tRump as, at best, a wrecking ball, and, at worst, a bad actor carrying out a Putin policy.
Enjoy being elsewhere for the time being! Enjoy your croissants, coffee, and hill climbing.
9
Trump and the GOP sold us to China in the tax bill, the rest is pure buzz.
3
@northlander: " Trump and the GOP sold us to China "
Sounds more like the progressive globalist policies.
1
Trump used to threaten to buy up whole companies with money he didn’t have only to sell what few shares he could muster when the share price went up. Is he now profiting from market volatility from his serial trade war threats? Am I being too conspiratorial here?
Is there an investigative journalist in the house who might like to dig into this or am I being too presumptuous?
8
@Alan McCall: The thing where he announced he was raiding a company, and then sold out when the price of the stocks went up, had no subtlety about it: itonly worked when he announced his purchases, and it was based on his (hyped) reputation as fabulously wealthy. It stopped working when other investors became aware of what he was doing, and stopped falling for his publicized "raids". At this point, it would take some sophisticated buying and selling to profit from the chaos he causes: I don't see that he or any of his connections have never shown that kind of sophistication. Not that anything like honesty or basic decency would prevent them, it just doesn't seem to be their kind of thing. So, my guess is that you're being too conspiratorial. I would say, yes, he loves chaos and instability, but it's only because that is the environment where he thinks can turn his bluster to advantage, both in business dealings and in politics.
2
Trade wars seem to precede real wars. You can almost see it coming with all this trade war flailing, sabre rattling at China, North Korea, Iran, and alienation of our allies in favor of Putin's Russia. All we need is a misstep and we'll be in WWIII.
11
It seems to me that Trump takes the path of no resistance when implementing ANY kind of policy. Having eliminated all of the grown-ups on his staff, Trump impetuously triggers dangerous governmental actions without logic or congressional approval and labels any criticism as nothing but hateful rhetoric spewed by an unAmerican and socialist Left. Irregardless of any potentially disastrous consequences the President loves to create global havoc just by saying "Make it so." Renowned for his non-existent attention span, he is like a child watching cartoons on television, secure in an oblivious worldview which goes blank and randomly shifts, like a red, white and blue slot machine, after each commercial break on Fox News. And now for the biggest thrill of all for an impotent and unaccountable leader. An Iranian war for no legitimate reason, wiping his past atrocities off of the slate by it's sheer scale, nightly body-counts and unpredictable outcomes.
6
He understands full well how tariffs work and does not care as long as he can use the subject to keep him base worked up—example: The Wall—and off the subject of his crimes.
He also knows full well what waits for him the day he leaves the presidency, and he will do anything to delay that day, up to and including taking the USA over a cliff. He hopes by that time his Congress and SCOTUS will have saved his hide.
10
thank you Paul. i have always appreciated your thoughts, and factual input.
11
If this is all in the name of "winning," dare I fear what "losing" will be like.
7
Too much focus on Trump.
Yes, Trump takes the lead. But Trump would be nowhere without his Republican Enablers: Mitch McConnell, Lindsay Graham, Devin Nunes, Jim Jordan, Chuck Grassley, Gail Collins, et al.
Every patriotic American should vote every Republican out of office. Even that would not be enough to retake the federal courts, but it would be a start..
24
Gail Collins? Have we missed something?
@Democracy / Plutocracy "Gail Collins"??
I think you got the wrong Collins there.
@Democracy / Plutocracy
I think you mean Susan Collins
1
Not only were Trump's assertions that "trade wars are easy to win" fallacious, but the country that instigates a trade war is always by far the biggest loser. The retaliating nations always have a tremendous advantage over those instigating protectionism. This can be easily seen with the tariffs on steel and aluminum that increase the costs of every product made in the US that uses those metals. Thus, American consumers and producers are already net losers from these ill-advised protectionist tariffs, even before any retaliation. These tariffs increase consumer prices and make products produced in the US less competitive, relative to those manufactured goods made outside the country using steel and aluminum priced at the world market, rather than the artificially propped-up, protected US aluminum and steel markets.
As Trump discovered when a retaliatory tariff was put on US motorcycles by the EU, mostly impacting Harley-Davidson (HOG) , which will not raise any costs on any EU producers or for anyone in the EU except for buyers of motorcycles, the cost to the retaliating nations is miniscule. HOG has announced it will have to shift production outside of the US as a result of the tariffs. Thus, on top of the harm to US consumers, producers and exporters of the steel and aluminum tariffs, before any retaliation, American workers at HOG lose jobs and shareholders of HOG suffer as well. .."
https://seekingalpha.com/article/4205253
4
It's worthwhile to put this trade war into words that a Trump supporter and real Americans can understand.
With each new, higher tariff on imports, the more money you will have to pay for soap, towels, car parts, light bulbs... and the less money you will have in your pocket to buy your next AR-15, Sig Sauer, or Glock... the less money you will have to purchase ammunition, pay fees at the gun range, and buy that solid gun safe.
10
Is any one surprised when Trump's transformation of the USA into the DSA spreads to the rest of the world? All that is left is for him is to start a world war. It looks like Iran will be his starting point. Both the Saudis and Israel (at least Netanyahu) are itching for it. It will move closer to home as he puts a strangle hold on Venezuela like he has already done with Iran and pull Cuba in to the fray. Given the time and distraction North Korea will make a move on the South. Japan will react and China will get pulled into the conflict. I think Europe will sit this one out.
2
Anyone with any actual experience doing business in Asia knows that countries like China and India long ago declared war on American goods and services.
2
"Wasn’t this inevitable in any case? I don’t think so. True, U.S. economic dominance has been eroding over time, not because we’re getting poorer, but because the rest of the world is getting richer. But there was reason to hope that a relatively peaceable international order could be sustained by an alliance of democratic powers."
Wait. Wait. Wait. What has happened is inevitable. The rest of the world sees what the United States has, and wants it. You know that Dr. Krugman. From the poorest most destitute of "nations" in Africa or Island countries all around the globe, they all now possess INTERNET ACCESS. And they see the shiny beautiful things in the US (advertising) and think, they are only one step away, one bad trip away from possessing all of it.
I encourage all world economists to travel to the ground level where the police of the entire world work.
Invariably, Police state that the source of all crime is the misunderstanding of wealth. That's what we have NOW.
I am completely confused by Dr. Krugman's comments. He does suggest that President Trump might be doing a positive thing, but then presumes it is malevolent.
I don't support Trump. But within this economic analysis, there appears to be hope. It is the CIA, which a long time ago stated that this is the end of the PAX AMERICANA. And it was or is the CIA's explicit analysis that the world is just out of control, but falsely controlled in part by only dictators.
1
@Pablo Casals, I don't understand your comment. You say that Dr. Krugman's analysis offers economic hope. Do you mean because he downplays the short-term economic effects of tariffs?
I don't think Dr. Krugman believes Donald Trump's trade wars are positive. However, when he talks about Trump acting malignantly, he's referring specifically to Trump's weakening the Pax Americana. I haven't heard the CIA saying the Pax Americana is over, but I doubt they pronounced it dead, as you infer.
3
@SandraH.
First. I and other readers had difficulty with the ambiguity of this article.
No. I don't think anyone including yourself can know what is in the mind of anyone, including Mr. Krugman.
Why bother me with your difficulty with my interpretation?
The CIA has been on record, long ago, way before Trump was even in the running for President, as having stated that the PAX AMERICANA IS OVER.
Read the CIA'S report. They have a book you buy of their analyses of the world, its economics and wars and religions.
People everywhere are subject to reality TV syndrome. At one time, it was only a novelty they watched on TV. Over time, we've come to embrace the misfortune of others and rancor, as a way of life. That is what we have here in the US, and parts Europe. It is now reflected in our politics and thus our economics-trade policies. When we can't fill our need for chaos, we create it. Thus, we elected you know who, to help fulfill those needs.
9
@Walter Ingram
Television and the Justice department ranks elected Trump, not American voters
1
Economic USA hegemony post WW2 is outdated and Jurassic. There are competing economies to influence the world. USA has to compromise to these growing and forceful economies. Donald's policy is stated in my first sentence.
5
What a mess, this opinion on Tariffs seems to be about:
30% economics
60% political upheaval
10 % undecided
100% disaster
5
The Trump/Republican handling of foreign affairs and trade is as ignorant as their neglect of domestic affairs.
Trump envisions a future world of self-contained nations with the USA serving as international arbitrator and policeman. But, America is not moving toward self-sufficiency, has proved incompetent at resolving foreign civil wars and international conflicts, and is reneging on essential trade relationships and imposing trade sanctions on foreign countries.
There is another approach. China does not interfere in the affairs of other nations and regions. Instead, China diligently builds its cultural and physical infrastructure, and promotes internal unity. China negotiates trade pacts, and builds a trade infrastructure ("Belt") of foreign ports, roads, and railways to secure its trade routes for the future.
Which approach would you bet your future on?
12
@AynRant
China does not interfere in the affairs of other nations and regions?
You seem to have forgotten about Tibet, Xinjiang and China's neighbors in the South China Sea.
China is acting as if they're trying to copy 19th Century Britain.
5
@AynRant You seem to have missed a big chapter concerning China's investments in Africa and in South America. So ok, the Chinese are much better builders today than are we. Have you been to China? Would you like to be Chinese? I will trade your perfectly smooth roads for our potholes any day.
1
@AynRant "China does not interfere in the affairs of other nations and regions". Ya gotta be kiddin me
1
In order to make America great again,Trump has picked an economic fight with most of the world. China on the other hand has a 30 year plan to gain economic power and rather than turn inward is reaching out to all economic regions of the world. Where is trumps 30 year plan? China may be an economic threat but our go it alone policies will only aid China in cementing economic ties with other world economies leaving the U.S the odd man out.
24
After reading this article, I still fail to see why the US should not pursue a policy of enforced, balanced international trade, rather than one of chronic negative balance to subsidize manufacturing growth elsewhere. That may have seemed sensible as a short term policy to help others recover from the effect of WWII, but no longer.
I would favor a policy of balanced trade, not one based on tariffs, but one based on regulation of currency exchange. Grant US exporters $ trade credits that US importers must buy on a regulated exchange before releasing equivalent $ to pay for imports. With those balancing restraints in place, then fine. Let comparative advantage determine the make-up of those exports and imports.
2
The Eastern Bloc countries tried this approach. The economies suffered as trade occurred using black market currencies. With cryptocurrencies, it would be even more difficult now to control trade in this manner. The reason we have chronic trade deficits is because we run massive government deficits.
5
@Robert: Most US international trade is conducted in US dollars, not in banknotes, but via dollar bank accounts in largely US based banks. I doubt that what happened in the Eastern Bloc, before it fell apart, is applicable.
2
@Penseur Trumd does not want to "pursue a policy of ...international trade". Otherwise he would do all this through the existing international trade organization, which he is about to destroy, just like anything else he touches.
Another way to look at this: If a leader was taking orders from a hostile power, wouldn't this trade war fit well into the plan? Split trading partners, create economic and political stress, and potentially divert business to the other power?
10
Well I don't have phd or anything but, we have an economy that's going along a pretty good clip here. Although the tariffs represent a tax for us, it's a tax that we can absorb or, so I'm hearing. But, besides the actual added expense of the tariff to consumer goods, shouldn't we also be concerned with consumers being less willing to spend and slowing the economy down? And if a slow down is inevitable, can we control it or do we eventually end up with the possibility of a recession?
Trump may be trying to fight for the right reasons but, are we risking way too much? Or maybe all this is just to cater to Trump's need to provide his supporters yet another scenario of victimization.
2
@John M
The national economy ought to be going at a good clip. They have everybody working two jobs.
9
Despite the dire warnings, the economy does seem to humming along at rates unseen in decades. Is it possible - just possible - that the Republicans are right?
3
@Douglas Evans
But is corporate profit a good thing when citizens are responsible for the zooming increase in the deficit? The corporations can shift their taxes overseas while for us and our children the giant debt is building up. Should the debt really be growing this fast in a "good" economy?
10
@Douglas Evans Three words; trillion dollar deficits.
4
@Douglas Evans No, they are riding Obama’s coat tails. At least for a while longer, it seems.
2
What Trump counts on is the perceptions and not the reality. The perceptions of a successful businessman by making a brilliant deal with jet lifestyle got him elected. As a president, he portrays himself a strongman who dare to fight trade war against the rest of the world to create the jobs in the rusted belt which may get himself reelected exactly by the same people because there have not been any serious policies proposed by the Democrats except paying off student loans and Medicare for all.
4
Krugman is much too modest. In 1978, as a young professor, he wrote a paper titled 'The Theory of Interstellar Trade'. This paper is the seminal work in this field, but was first published only in March 2010 in the journal Economic Inquiry. It is available online if any readers wish to get current on this branch of economics.
14
What I find interesting and a bit unsettling is that many on the center-to-left actually agree with Trump on his approach to dealing with the trade deficit. Now, I understand that Americans want to hold other nations accountable for this (particularly China). However, since when do liberal-minded people believe that a regressive tax--which is what these tarrifs are--on lower and middle income Americans is a good thing?
As Mr. Krugman rightly points out, Trump doesn't appear to understand the damage he causes with these trade wars. I suggest that it is time to let our representatives know that congress must step in before this insanity escalates further.
25
@Bill B I suspect many liberal minded people, think Pax Americana, was/is a corporate excuse given to labor when they shipped their jobs to cheap labor markets. It was to comfort them, as they did their part for world peace.
2
@Walter Ingram, No, the movement of labor was an inevitable result of markets shifting throuought the latter half of the 20th century. Pax Americana was something that American businesses understood had to occur. How many major world economies were left standing at the end of WWII? One. That meant the world had to buy from one source for several years. But it could only last for so long. Those nolstalgic for the 1950s never seemed to grasp the significance of that simple fact.
5
@Bill B The US congress Senate is scared to death of Donald Trump. They won't do anything that he doesn't approve of. The senate is DOA.The GOP won't vote against Trump.
His voters don't know how tariffs work. He is just giving them what they want.
16
But economists like Paul Krugman, who is quite knowledgeable in his subject, do not take a broader view of world peace and sustainability. Before Trump got elected, the record of reputed and Davos economists on environment policy is shameful. They never warned about China's over-production and the immense cost of that production on environment. They never wanted to put a lid on western over-consumption, which largely drove China's over-production and its devastating effects on the environment. They were all quite happy to make money while biodiversity has plummeted. There were warnings but scientific community but they did not care. A pax-america that pollutes the earth is not worth it.
8
@Jay, while this is true, it's not quite the same as wars. I suggest you visit Iraq and Syria to see what that looks like.
2
@Larry L slow poison vs fast poison. But my point is the studied selfishness of the Davos crowd! They were happy trashing the planet so long as they lived in their marble homes. They didn't care about Elephants or bees. An all out trade war might help animals and the planet.
"...largely benign U:S: hegemony..." Now there is an Orwellian phrase if there ever has been one. There are more than a few countries in the world that do not envision at all anything benign in U.S. dominance over their countries. Of course, this goes for countries like Viet Nam and the rest of Southeast Asia, for much of the Middle East, and certainly for pretty much all of our hemispheric neighbors south of the U.S. The list pretty much includes every area in the world. The U.S. is not a benign, good neighbor and we should quick deceiving ourselves.
11
@Cacho Fuentes, the Pax Americana has been a very stabilizing force in the world for the past 75 years, regardless of what you or I may think about what individual presidents have done. I think the solution is to vote against those who keep promising a "strong military," which is often code for a more militaristic posture.
3
@Cacho Fuentes
I wonder how you would describe Putin 's and Russia's trade policies vis-à-vis that of the US under Trump..
In other words, the 21st century will belong to China. And the 22nd, 23rd, etc.
9
I think you are correct, but unfortunately, only because I agree with you, not because I have any sophisticated understanding of these issues.
6
Each time Krugman refers here to "Trump," "Trump's trade war," or Trump's policies, I'm a bit thrown. Can Trump really effect all this on his own—just himself, the family, his brand? Really? When Krugman refers to "Trump," does he really mean the whole Trump administration; or more—Trump enabled by the Senate Republicans; or even more—Trump carried by his transmogrified Republican party? Please specify.
10
Unfortunately congress unconstitutionally abandoned its authority to enact taxes in the form of tariffs. Our trade treaties allow tariffs to be imposed for “national security” reasons, and congress left that determination to the president.
Normal presidents have used that power in limited, somewhat plausible ways, always to protect some particular industry. Trump evidently thinks tariffs make the country richer, so there can’t be too many: the more the better.
As a matter of law, he’s within his power, yes. What’s weird is he can lie with impunity, claiming Canadian steel represents a national security threat — or that immigration is a national emergency that can only be solved with a wall congress considered but did not approve, and that won’t be built for years to meet the “emergency” — and the supine congress lies idly by.
12
@Grace
No need to nuance this. The Republican Party and the Senate and the Administration are all a ‘one-man show’.
The Rep. party along with the two branches of the govt. have been bullied into submission by a modern-day mob boss.
When you can sign ‘Executive orders’ at will, who needs Congress or Senate anyway?
It kinda goes without saying but the 45th represents all of the above.
4
@Grace
yes.
Well, trump may be the poster boy but he is backed up by every Republican on the planet. And Trump would not be doing what he is doing without the political force of the Republican Party. The destruction of Pax Americana is driven by an authoritarian oligarchic Republican Party aligning with Putin’s oligarchic Russia. The counter intelligence report on Russia and the Republican Party by mueller has been buried or not even started. Guess why? There is a plan.
35
@BillC
I believe most Republicans are abhorred at Trump's trade war but for unknown reasons they are being rather mute about it. Standard Republican orthodoxy is free trade. Trump somehow dreamed this one up on his own, packaged it together with his borderline racist and xenophobic messages, and sold it to his base as MAGA. I doubt that Trump really cares about trade policy; what he really cares about is winning another four years and keeping the indictments at bay.
5
Why Trump is threatening tariffs on our European Allies is because if he didn't, then the Chinese would turn to them, and do sweetheart trade deals with them that would undercut the United States and the effectiveness of Trump's tariffs. By threatening to go after our European Allies and Canada at the same time, Trump has effectively told them that if you do a deal with China that end-runs the US, he will come down on them like a ton of bricks. Prof Krugman admits China is a bad actor, presumably deserving of some sort of policing, but he is naive to think we can count on our Allies not to sell us out to China. How could we expect anything but that from our Allies? The Pax Americana is entirely premised on allowing our Allies to take advantage of us in terms of trade as long as we get to call the shots on running the world, NATO, etc. But this system was not designed for a country the size of China which has not agreed to the quid pro quo of allowing the US to run the world - so China taking advantage of the US economically has broken "the system." Europe should not need the US to ask them to support us in reigning in China - they should realize that China is a treat to the system that they have benefited the most of anyone. And yet, the EU stands by silently and lets the US fight it out with China. Whether Trump going after Europe on trade is brilliant or dum luck, in the end, it does not matter, its actually the only way to keep our European Allies from selling us out
4
@Christine
To be honest: by threatening "us" (I live in EU), he made chances bigger we will create pacts with China, not smaller. Simply to make sure we can import at the same rate as we did from the USA before and dump the production in China that has become too expensive for Americans, by the tariffs.
To my dismay, because I don't like Chinese politics.
10
@Christine The only way to get cooperation from allies is to threaten and punish them. It's all they understand.
@Christine, I think you've misinterpreted Trump's tariffs against Canada and the E.U. They aren't predicated on our allies not doing business with China--in fact, China is building up trade partnerships in Europe as a result of our tariffs. Trump had the opportunity to join with allies in pressuring China, but he CHOSE to go it alone for political reasons. This tough-guy go-it-alone posture appeals to his base.
Don't believe Trump's demagoguery about our supposedly nefarious allies. They aren't "selling us out," as Trump would have you believe. We won't have more money if we spend less on NATO because we don't spend anything on NATO--we spend on our military, and we'll continue to break defense spending records under Trump. This year's annual defense budget is almost a trillion dollars. It has nothing to do with our NATO allies.
2
Interesting column, but his first paragraph emphasizes his status as a coastal elite, which could turn off some readers from the start. He is hiking in a foreign country (kilometers) and writing his column, probably on a laptop, while drinking coffee and eating a croissant in an outdoor cafe. It sounds appealing to me and probably most NY Times readers, but that introduction could be a turn-off to people in flyover country who may rarely if ever hike, travel abroad, or eat croissants in an outdoor cafe.
5
@A Realist
I live in "flyover country", I hike, eat good food, canoe in Canada where distance is measured in kilometers. But I suppose that being born in Brooklyn makes me an "elite".
Interestingly, I don't do these things alone, and my friends come from Ohio, Michigan, Indiana, and even Montana. Are we all elites because we eat at places nicer than Waffle House and McDonalds?
Stop the "Elite" nonsense. It doesn't exist now, never has, and never will.
14
TO @A Realist:
Well, yes, croissants and kilometers may be very foreign and off-putting, but what is the alternative? Every time I turn my TV to a political program it’s something about
Russian hogs or a smoking sow, all very non-kosher.
2
@A Realist
We're not all hicks.
1
As usual Paul Krugman helps us see the important part of this issue: Donald Trump, whatever the reason, whether it's ignorance, malign intent, or compromise due to being in debt to the Russian oligarchy....Donald Trump is actively destroying the system painstakingly put in place through the sacrifice of millions of patriotic Americans and other citizens of the world in the wake of World War II's punishing battle for peace and stability. Not to mention the destruction Donald Trump is wreaking on the system of checks and balances put in place by patriotic Americans who sacrificed their lives to rescue us from the then-tyranny of King George III of Great Britain. HOW MUCH LONGER WILL THE REPUBLICANS IN CONGRESS ALLOW TRUMP TO DESTROY AMERICA? ARE THERE NO PATRIOTS IN THE REPUBLICAN PARTY?
26
@Pluribus
Ya know, I am a liberal. I happen to think that the fact of our economy is doing well was anticipated during the "depression" of 2008 - 2013. Dr. Krugman was one of the few economists who analyzed the downturn as a depression, not a recession.
But Trump cannot damage it all.
With North Korea, he sparked all kinds of unwanted threats from them, but we then discovered that North Korea was miles and miles ahead in its development of nuclear weapons - that can reach our US land.
So, Trump did not do much other than to help new information to be released. It was "unintentional" information gathering.
Likewise, though Trump is inept, he just might do something to make the economic equations between the US and China more equitable.
@Pluribus No, all GOP politicians are available to the highest bidder, regardless of nationality. Call it “equality opportunity for conservatives.”
@Pluribus
Sadly....not a one.......but then again money is being made by one and all......Let's see their tax returns too....
How do Senators get to be so rich......Now that would make an interesting investigation...
There is something about Pax Americana in Paul Krugman's thoughtful column that is hard to swallow. Mainly that it is not a truthful description of American foreign policy from the 1950's to the present day.
There was a brief period of hope after the defeat of European fascism and Japanese Militarism. It was the United Nations, conceived with the best of intentions to provide an alternative to military hostilities between nations. It soon became an instrument for promoting the goals of the Soviet Union or the American led NATO alliance.
The intervention by the United States under the quaint notion of a "Police Action" in Korea ultimately cost the lives of 2.2 million Koreans, 600,000 Chinese and 34,000 Americans. Hardly an auspicious start the Pax Americana. Then of course there is American intervention in the Vietnamese Civil War, which took the lives of millions of Vietnamese and 58,000 Americans. The American intervention in Iraq is considered my many one of the greatest military blunders in American history costing hundreds of thousands of lives. Forget if you wish the smaller military interventions in Central and South America, for which in some proxy fighters were both armed and led by th United States.
So where was this Pax Americana? Even after the the end of the Soviet Union the Peace Dividend politicians talked about was quickly forgotten.
12
@Marvin Raps - It wasn't just Korea, China and America that fought in the war on the Korean Peninsula. There were 21 United Nations countries involved. Twenty-five thousand Canadians fought in that war and 516 of them died. A total of five million people were killed. Just saying.
Interesting column.
7
@MJM even liberal Americans forget their allies. We just don’t count. I kinda expect this from the GOP (“Canada is a free loader on our military”) but the disrespect towards NATO allies, all of whom have bled for the US, by both parties is galling. Most Americans don’t know that when NATO said they would invoke Article 5 on 9/11, tell us where to fight, the GOP said, in effect, we don’t need your help (that’s the polite version). Small wonder that when Bush wanted the political cover for his phony Iraq war, Germany, Canada, Turkey, etc. said “big mistake, if we can’t talk you out of it, we’ll sit this one out”.
Listen to your friend, America, you don’t have many left and Putin isn’t one of them.
Less Pax America, more military spending. not the kind of spending that makes a more productive and wealthy country for everyone.
6
Tariffs mimic tax increases for the economy as a whole. But some sectors, such as agriculture, will be hit disproportionately. That is Trump's base, and is a huge retaliatory weapon for the Chinese. Can you imagine Congress going along with Trump's idea to buy agricultural products and give them away as foreign aid (to mitigate the loss to farmers)? So even if the macro economic effects are small, the political effects can be large.
8
all of Trump supporters that aren't millionaires and shop at Walmart and the dollar stores will be facing increases in everything they buy. That should show them that the economy isn't that great and that tariffs hurt the American consumer,not the Chinese.
Maybe Paul should try to meet Trump and bring a picture book with him to really explain tariffs.
19
Let’s talk taxes.
Are tariffs a tax? Yes. (But only on Chinese goods, not on products from other low-wage countries.)
How about two other taxes.
1. Social Welfare Tax – When a U.S. worker’s job is offshored, U.S. taxpayers must help subsidize their family’s education, medical, food, and sometimes housing expenses. This is a classic example of capitalizing profits and socializing losses.
2. Defense Tax – China is recycling its trade surpluses into its rapidly growing military. When the U.S. increases its defense spending to maintain the balance, this is also a type of tax.
3. Global Pollution Tax – The Chinese have no meaningful environmental protection laws. They produce far more pollution per unit of manufacturing than does the U.S. – CO2, NOX, SO2, particulates, heavy metals, etc. In fairness, all but the CO2 have a mostly local/regional impact, so it’s the Chinese themselves who pay this tax most directly. But for anyone who cares about the Earth more broadly, this is also a type of tax.
When the Koch Brothers, Chamber of Commerce Republicans, neoliberals, and, yes, Dr. Krugman talk about de facto taxes, they love to talk about tariffs, but not about the other hidden taxes.
When Americans buy the latest goods from China, they think they are getting a great deal. But here is another bit of economic wisdom, “There is no free lunch.”
12
@John
1. The benefits to Americans from increased trade vastly outweigh the costs. There have been many studies of tariffs and they typically find that each job saved costs $800,000 or more. And most of the jobs saved are low end jobs probably paying 1/20th of that.
2. This is patently false. China imports under $2 billion in weapons a year, less than the United Arab Emirates. In reality, most of the foreign currency China earns from its trade surplus is spent on tourism (over $300 billion annually).
3. Wrong again. Many of China’s largest provinces have enacted carbon taxes or cap-and-trade, and China produces less carbon per dollar of industry than the US when you adjust the industrial production number for purchasing power parity.
3
@John. Clearly we should include the “taxes” you have enumerated into the cost structure of all those “cheap” products.
@Aoy
1. The $800K number that you cite is from a severely limited study about washing machine tariffs. Just a few of the issues include:
a. It only looked at global, product-level tariffs, not country-level tariffs. The country-level tariffs allow for the shifting of production to other lower wage countries. As such, the study is inherently not relevant to the specific tariffs on China.
b. It included in the calculation the increased prices of domestic producers, but did not also accounts for the impact of higher profits which will ultimately be reinvested or accrue to shareholders, both of which benefit the U.S.
c. It did not account for the multiplier effect of manufacturing jobs, which is varies by industry, but is in the range of 5.0.
Bottom line – it’s a poor study, especially to prove the point that you are trying to make.
2. China’s published military expenditures have risen by about $100 billion/year since their entry into the WTO. Most experts believe that these published estimates are artificially low. Yes, they also recycle their trade surpluses into other areas, but that doesn’t change the fact that the rapid growth of their export-driven economy has enabled a 10X increase in military spending.
3. The U.S. is much more efficient, producing 2,200 PPP units of GDP per ton of C02 emissions. China produces only about 1,000.
Beyond C02, however, Chinese manufacturing have much, much higher levels of other pollutants.
2
Can anyone explain the following part of the article to me? Krugman is usually so clear, but I don't follow this passage:
" When a large country like the U.S. imposes tariffs, one effect — if we don’t face foreign retaliation — is a rise in the price of U.S. exports, either though a rise in the dollar or by drawing resources away from export to import-competing sectors. This price rise is, other things equal, a gain for America (although not for export-oriented sectors like agriculture.)"
5
@Tom I have read this several times, and the logic escapes me. I think the good professor needs a few more words to tie the pieces together. Granted my degree in economics is from the dark ages and like you I can usually follow Professor Krugman's columns, but not this paragraph.
Not sure it is that important to the overall point of the column. We are in scary times. Trump's behavior and those of his same ilk are destabilizing the world and that will not have a happy ending.
5
The point was that getting more for what you sell is a sort of gain...unless you’re exporting, and unless China retaliates, which China will.
4
@Tom
Something is assumed to be held constant, probably net account balances. Economics is a multivariate problem and it often gets reduced down to one variable by assuming the others stay constant. If net account balance is to remain constant, the change in exports has to be offset by a change in imports. Exports change because with the higher tariffs, demand is reduced for the imported item. To China, that ends up looking like a rise in the dollar.
That's my take on it but hopefully the Prof. tells us what he meant.
1
"was from the beginning a crucial piece of the Pax Americana. "
Isn't the end of Pax Americana a good thing? No, it's not?
I was an active participant in Cold War V1.0 and a true believer (at the time). Over the years I was told the US was a neo-colonial, imperialistic power that added to the instability through its brushfire wars.
Now comes Krugman lamenting the undoing of peace the US enforced/undermined/resisted/destroyed/enabled/countered/created/funded/unfunded. Take your pick.
I'm going to sit out Cold War v2.0 and have a laugh or two.
BTW, democracy has not collapsed in Poland. It's just taken a while for most Europeans to figure out what was occurring with the waves of migrants showing up on their shores. Perhaps Krugman can take a run through a park in Bavaria. He seems to develop keen insight into the state of things by doing so.
3
If you or Poland think the “waves of immigrants showing up on (our) shores” is bad now....wait until the coastal cities and island nations suffer from severe sea level rise!
@Mari:"If you or Poland think the 'waves of immigrants showing up on (our) shores' is bad now"
It has slowed down in Europe with hundreds of thousands asylum seekers sent home. Europe is catching on and figuring things out - finally.
"Actually, what foreign retaliation does is prevent tariffs from being less bad than an ordinary tax increase. When a large country like the U.S. imposes tariffs, one effect — if we don’t face foreign retaliation — is a rise in the price of U.S. exports, either though a rise in the dollar or by drawing resources away from export to import-competing sectors. This price rise is, other things equal, a gain for America (although not for export-oriented sectors like agriculture.) And this “terms of trade” effect can mitigate or even reverse the overall losses as tariffs distort the economy."
No comment here, just pointing out that taking a little time out from coffee and croissant may not make for the clearest exposition by the famous professor.
2
If you shop at Walmart, 1) it's highly unlikely that you're in the 1%, 2) your taxes just went up. The comment, "Trade wars are good and easy to win" makes a lot more sense once you observe who Trump is condemning to fight on the front line.
37
Trump’s trade war should correspondingly be seen as part and parcel of his embrace of foreign dictators, lack of respect for our allies, and evident contempt for democracy, at home as well as abroad.
What you’re doing, instead, is tearing down what’s left of the Pax Americana.
Trump is malign. He’s working actively to make the world a more dangerous, less democratic place, with trade war just one manifestation of that drive. And the eventual negative consequences for America and the world will be much bigger than anything we can capture with economic modeling of the effects of tariffs.
11
What Trump does not understand and apparently his staff does not either or cannot enlighten him is that you cannot publicly make demands on East Asians and expect them to capitulate to them. Saving face is a long standing social more in that area of the world so losing face is just unacceptable. Xi may be a strong man, but the Communist Party cadre around him is watching him to see if he will crumble for our grating leader. The objective of correcting the imbalance in our relationship with China is perfectly valid. The means is not to conduct the necessary diplomacy in public with periodic threats and steam roller tactics. Trump should have learn that lesson from the Mafia.
23
@Will25 Bingo. And Donnie Boy's last minute tweets are designed not to solve anything, but for show, to prop up his fantasy that he and only he knows how to do X. We believe you Donny, just as much as we appreciate those invisible clothes you insist are the finest silk in all the world.
4
Again an excellent column by Dr. Krugman.
Economics is not a topic I feel at ease. However, it seems simple to understand the link between sensible trading practices/partnerships and world peace. Just a person with an average IQ can comprehend it. Unfortunately USA has under Trump a person which lacks any sort of intelligence except the one of been a good con man – a sales man who lies constantly. (The last lie that concerns us directly is that he has given Puerto Rico 91 billion dollars in aid – more than anyone else. Big false statement!)
At first, there were grown-ups around him – no longer. That IS scary.
Enjoy your vacations – be careful with those hills.
17
Trump’s trade wars serve the same function as military wars did for Bush in 2004. They rally the base by creating artificial enemies… conveniently close to election time. Only the new enemy is not Saddam’s non-existent WMDs but foreign countries in general.
How else to explain that many of those most affected (eg, farmers) are the first to defend an indefensible president? It’s mind-boggling how often this strategy seems to work.
24
@Michael I think Trump is right now setting up for war with Iran. Just like Bush the Lesser - "I'll be a wartime president and be re-elected" (paraphrased).
We need to begin push-back on this NOW.
3
Wouldn't our tariffs on imports from China (and Chinese tariffs on our exports to them) lead to two things: 1. Production shifting from China to Vietnam, India etc? And 2. At least some of the supply chain actually moving back to the US? (And bring back some of the manufacturing jobs?) Aren't these good things?
4
@AP917
I agree the tariffs on China will move manufacturing to the countries you mentioned, in fact one reason we see more imports from those countries is China began experiencing the same problems we faced here in the US, and that was they were becoming a higher cost producer of goods, and it was cheaper for the multi-nationals to shop around for better deals, particularly in the area of low cost items such as garments.
I am sure some of the manufacturing capacity can be returned to the US, but since factory automation is now commonplace I doubt moving some manufacturing back to the US will result in any meaningful increase in employment.
3
@AP917 Just "bringing back the manufacturing jobs" is not really going to work quite the way you think. Back in the 80s and onward the people like Romney were buying out businesses with overleveraged buying power, and then sold off the parts of the companies, very often shipping the actual factory and tooling to China where they set it back up and the people whom the workers in America trained for the jobs took it over at a much lower wage.
They kept doing this until much of America has been hollowed out because the Corporations do not want to have to pay American Wages for production. They do not even want to pay American Wages for sales or driver positions even, look at Walmart and the Uber CorpRat Opportunivores who not just eat Anything, they eat everything, and all of it, leaving none for their workers who produced that profit for them.
Gig companies may end up taking a major fall if they get forced to pay for such things as the auto insurance while the driver is on their time, full wages and Soc Sec payment withholding etc. What was started as a nice sharing app has turned into a Corprat Raider Paradise of extreme overcharging and underpaying...just like Trump.
We do not need a bunch of mini-Trump businesses like Uber and Lyft or Facebook. Their profit level to what they take is extreme, and they pay little to no tax or get Refunds!!!
Time to remove the CorpRat Vulture Capitalism System of ''Gig Economy", as even its name puts the worker dangling from a sharp hook.
1
Yes, tariffs are a tax on U.S. consumers, IF we apply tariffs equally on all countries of origin.
But we are only applying this tariff/tax on China, not other low-wage countries. U.S. companies with foresight and wisdom (precious few), have used the last two years to shift their supply chains away from China to other low-cost countries including India, Vietnam, Malaysia, Philippines, Mexico, and others. The other U.S. companies will now scramble to make the same shift.
Once the shift is complete, U.S. consumers will pay little or no more than they are currently paying for Chinese goods. As such, it’s not a tax.
The risk isn’t that Trump WON’T reach an agreement with China, it’s that Trump WILL reach a deal and eliminate the incentive for U.S. companies to move away from China. That would be very geopolitically unfortunate.
9
Thank you. I resemble your remarks. I am, admittedly, an early proponent of the return of American manufacturing when I wrote vigorously here about the national security threat we faced because if we were isolated politically or militarily, we had no manufacturing infrastructure to make boots for example. I felt strongly that we needed the manufacturing here at home.
Thank you for your lesson about "Economic Interdependence". In Newsday about 35 to 40 years ago, I read an article about the theory that credited a man named "Armand Hammer" for the idea. I defer to your naming Cordell Hull as the correct credit.
Trump was elected partly on some of my ideas. He reads this paper. I never intended any political or military conflict. I felt I had a good idea to rebuild manufacturing and the warmonger adulterated it with a far greater audience than I have here.
The issue is rife with corruption throughout his administration. I feel the Tariffs are now a means of offsetting the Republican tax cuts.
The Democrats, traditionally the party of Roosevelt that cares about all Americans, must understand I still firmly believe we need manufacturing back home and they should legislate penalties against businesses and investors who export our economic engines and wealth.
We can still enjoy economic interdependence to keep the peace, but you never know when we will need lots of boots.
2
@WITNESS OF OUR TIMES Your State Of Opinion is probably one of the red states that are ready to provide even more boots. Please do not count on me.
And so the never ending game of “King of the Mountain” continues. Those at the top literally fighting to keep anyone else from joining them. With the same old results and the same old lessons. I am beginning to think humanities ability to progress is becoming inadequate in the face of rapid change. And I am becoming unable to care.
9
@C. Neville
Please continue to care. WE need you!
Who is going to read this? And care?!
I have to just roll my eyes and wonder if these ideas and analyses will ever reach those whose votes could be swayed from Trump.
Hopefully someone will read this and distill these thoughts into a real article that can explain in layman terms.
9
With Trump in the Oval, and Putin increasingly content to engage in wars in multiple countries, pursuing escalation and a new arms race while blithely undoing treaties long deemed sacrosanct, there's a very genuine concern in the EU that adding strong doses of criticism to the right-wingers in Hungary or Poland will reduce the effectiveness of those countries as a simple, basic territorial buffer against any sudden mad manoeuvres by Moscow.
These are dangerous & uncertain times. Things are being taken day by day, week by week. Unfortunately, the right-wingers can see this & it allows them to gain some ground. Time, however, is not on the side of Russia.
As for what is really important: Health is. Health relies on Ag, of course. With trade wars raising all prices, reducing the amount of disposable income left in any but the most hyper-affluent households, Health is bound to suffer.
Long term, that has devastating implications for the wealth of nations per se. Actuaries may have an impression that human bodies are an infinitely renewable resource, but, in fact human fertility is broadly in decline across all groups.
Trade war means everything from paper & plastic for packaging aspirin & band-aids, to the fuel to transport meds & bring doctors to the hospital goes up. Ambulance rides cost more. Bottom line: more expensive health care, meaning shrinking life expectancy.
Trump is making the US more like Russia, each day, incrementally, relentlessly. Republicans are helping
9
Corporate income taxes are as regressive as tariffs.
2
@Peter
Huh? Regressive=paid disproportionately by lower income folks. Hard to call corporate interests lower income.
7
@Alan Gulick
Aren't corporate taxes passed on to consumers in the form of higher prices? I believe the answer is yes. This is what makes them regressive in the same way tariffs are regressive.
Companies require, and use, public infrastructure. This must be paid for, so it seems reasonable to say that companies should have some tax liability. But because it is arguably consumers and workers who really pay corporate tax (thus making it a regressive tax), and because it can depress economic activity, corporate taxes should be kept to an absolute minimum, or be eliminated altogether -- along with sales tax or VAT.
What we should have instead, in my opinion, is a tax on capital gains, and a progressive income tax with a very high top rate, along the lines of what it was circa 1947-1963, i.e. about 92% (but with far fewer deductions this time).
2
@Anatomically modern human If those taxes are passed on as higher prices the higher prices reduce the volume and thus the profit, and even the market share if there's a comparable alternative. So the owners might just take the hit instead, depending on details. But yes, corporate taxes shouldn't be any higher than individual taxes. It's profits from short term stock trading that should be heavily taxed.
1
The basis of Pax Americana was never primarily trade. It was always U.S. military and financial dominance.
The relative military and financial strength of the U.S. has been declining for several decades, quickly accelerating after the Bush/Clinton clan pushed Chinese entry into the WTO. They naively assumed that China would accept the role of junior partner in a U.S.-led global order. It was a catastrophic geopolitical mistake born of arrogance, ignorance, and greed.
We are now in the unfortunate position of dependency on a rival/adversary the we ourselves fund with massive trade deficits.
The unraveling of Pax Americana also occurred as Russia emerged from the chaos of its post-Cold War collapse, rebuilding its military and exerting influence over formers Soviet republics. In the face of this, our NATO allies in Europe and Canada refused to sufficiently increase their defense spending, preferring that the U.S. incur massive budget deficits to protect Europe.
We can indeed prolong Pax Americana, or at least a Western-oriented global order. It will require the West to stop funding China’s rise through massive trade deficits and will require our allies to shoulder more of the global defense burden…two of the primary policies pursued by Trump and opposed by Democrats and the DC establishment.
2
@John If Trump was really intent on trimming the Chinese sails, he wouldn't be simultaneously attacking every trading partner we have. He would be creating an impregnable alliance, an insurmountable "wall" if you will, with all China's major trading partners. Faced with a catastrophic decline in exports on all fronts, the Chinese leadership would see the wisdom of surrendering the most arbitrary aspects of its "sovereignty". But, that is not the Trump doctrine. Trump's doctrine, is to go toe-to-toe with every "competitor" who he feels is taking advantage of us, one on one, all at the same time. The idea being, that as each country comes to terms with the USA, the others will see the wisdom of also accommodating us. That's not going to happen with the Chinese. They are currently intent on opening the entire globe including the southern continents to Chinese trade dominance, and they'll let the US share of their trade sort of slide down for now, if that's what it takes. They know for a fact, they can out-last Trump; Trump has at most, 8 years to play. The Chinese believe they will have centuries.
5
Irregardless of what Trump knows or doesn't know, "gets right" or otherwise regarding his trade war, he's not losing any ground, nor is the economy.
In fact, Trump is likely increasing his chances for reelection by perpetuating the imbroglio, as it appears many Americans from both parties agree with his stance on the matter.
The trade war with China has been ongoing for almost 2 decades, and America was losing it.
It's safe to say at this point that it had to be brought out into the open, and like him or not, Trump made a move that had to be made, for better or worse.
The dependence on Chinese imports has to be reigned in, like a drug addiction or a malignant tumor in need of excision.
Ready or not, it's the dawn of a new Global economy.
Adapt.
4
@Ken Russell We have not had a trade war with China for most of that period. The US Chinese strategy was the same it used in Japan, S. Korea, Western Europe, and Germany after WW2 to ensure world peace...build up stable, exporting economies, within the framework of global trading institutions and rules to resolve conflicts, backed by the judicious military might of the USA. This strategy was adopted with some important differences due to China's size and isolation from the rest of the globe, but the major goal of establishing Chinese dependence on a strong exporting economy worked like gangbusters. China has been pretty darn peaceful and fairly cooperative on a whole host of knotty issues as it emerged economically. Sure, we gave the Chinese advantages, same as we gave the Europeans and Japanese and Koreans, so they could get a leg up. Fact is, we have reached the point, where we needed to shift gears and level the playing field, just as we have done with the others. Obama believed the TPP was a big step in that direction. And if trimming China's sails was trump's goal, he wouldn't have attacked every trading partner we have simultaneously. He would have enlisted them to present a united front to China. The USA by itself, cannot force China to fair practices. The entire globe is still open and vulnerable to Chinese trade advantages, licit or illicit, and we can't do anything about that with Trump's one-on one trade strategy. He's a loner, and that limits our potential.
4
@so be it
Our wariness of the Chinese and the possibility of future trade problems go back to the days of Nixon.
When Nixon visited China and began our normalization polices towards the Chinese government Senator “Scoop” Jackson recognized the threat of cheap imported Chinese goods, and introduced a Bill that limited trading with countries known for human rights abuses.
The Bill passed and for a period of time the American public went along with condemning countries and companies that were shown to be guilty of human rights abuses such as South Africa, and Nike’s use of child labor production, for which they issued a public apology.
Since Human Rights abuses were a key part of the Carter Administration and after the 1980 election they quickly became a non-issue with most of the American public, who now couldn’t care less about human rights abuses as log as the American consumer is ensured of a bargain price.
Finally, although long toothless the Jackson Amendment remained on the books until its repeal under Obama.
“Regardless”
The way that Paul explains it here and elsewhere, it is obvious as he says that this is a regressive tax that falls on American consumers.
Trump has been bragging about the amount of money flowing into the federal coffers from the tariffs as though that money came from China.
Does he really believe this?
The Republicans have been pushing for a national sales tax for years, which would be a totally regressive way to fund the federal government. Combined with ever more tax cuts for the rich, the entire burden of government would fall ever more heavily on the middle class and poor.
Isn't this a way of sneaking a national sales tax, which the Rs could never really campaign on successfully for a host of reasons, under the tent?
So in its effects, this seemingly 'un-Republican' Trump tariff, once again turns out to be the same old same old republicanism of comforting the comfortable and afflicting the afflicted.
15
@Bobby Absolutely. The wealthy have been injecting more and more regressive taxation, while cutting back progressive taxation. Every local tranportation or other project is financed with sales tax increases. You never see highway financing paid for with increased property taxes on million(s) dollar homes, or on billion dollar commercial real estate. Tariffs are just like sales taxes. They fall on the consumer, and poor folks spend a much larger portion of their incomes on consumption because they have to. Trump is not a dummy; he knows what a tariff is, how it works, and who pays. And he's down wid dat, I assure you. He sees economics as Darwinian...the strong, the smart, the avaricious, succeed and survive, and that's how Nature intended it.
1
What I see is a tax on middle class consumers, to make up for tax cuts for the rich.
19
It is unfortunate the TPP approach to confronting China was not carried out by the US and associated trading partners. China will only respond to quiet power. The Chinese are too proud and remember too well the humiliation of western occupation. To get real reform of Chinese trade rule breaking will require consistent quiet combined efforts.
China will give the Donald a fig leaf to hide behind in the current standoff, something he can capital tweet about, but it will not be much worthwhile. The Chinese realize Don gave away his game early by bosting about his power. Now he is desperate to show something, anything to his supporters. So you will see some soybean promises and nothing much else that addresses the concerns our trade and trading partners.
5
Another good analysis by Mr. Krugman. Under Trump, the Republicans have been scaling back American ambitions to those of a minor power, too afraid to work in concert with its economic peers, and choosing a path of known failure against its Chinese adversary.
Fortunately, many Americans are still willing to think globally and act locally. The majority too, if the 2016 popular vote is any indication. The new order will not be the same as the old order, but it won’t be lacking in American leadership.
2
This is a very insightful read of the long-term dynamics of trade wars. In his final book "Battling to the End," Rene' Girard writes, "Trade thus has all the features of war: if smooth settlement of exchanges degenerates into furious competition a trade war can become real war" (p. 59). And as you observe, Trump has made the world more dangerous. Trump is anxious about his re-election and escalating conflict in the world to feed the hate and fears of his base that he feeds of of for his security blanket. This is no time for timid leadership from the Congress.
19
People underestimate the effects of Pax Americana. In 1943-48, the US decided that to prevent WW2 leading to WW3 just as WW1 had led to WW2, that it was going to create a zone of safety from external enemies and free and fair capitalism. This zone started with Western Europe and Japan, which stopped those areas from re-militarizing or engaging in damaging economic warfare.
,
The effect was nothing less than the dawn of the most peaceful and prosperous 70 years that the world has ever known, despite the presence of the USSR and the cold war for the first 40 years. Pax Americana extended throughout the world; we went from a world where 80% of people feared hunger, to one where perhaps 10% does. There are fewer people dying in wars now than ever before in world history. The world is so peaceful and wealthy that our problems are too many people, obesity, and too much fossil fuel use. Those are the problems of the wealthy.
.
I don't begrudge the cost of the US military, or how we have been generous in trade deals in the past to our slight relative disadvantage as a nation, because I appreciate just how much Pax Americana has given all of us. Yes, it has to evolve as the world gets richer, but let's work hard to keep something similar. The world before Pax Americana was a violent, hungry place, and it could be again.
19
Thanks, Dr. Krugman. Trump strikes me as much like someone's abusive boyfriend who not only beats up the person (voters) he claims to love, but who creates chaos all around himself in order to "win" at various poorly planned criminal activities. Only, of course, Trump is rich, or at least has been able to live as if he were, so no prison time (so far).
1
Thanks for posting while on vacay, Dr. K.
Question: How does Very Stable Genius 45*'s international economic agenda and effects on democracies globally, differ from what one imagines Putin would be aiming for ?
Yes, we know - the question answers itself.
8
I certainly hope I'm wrong but it seems to me that Trump wants a big war, maybe even WWIII. After all, it's the presidents during big wars that get called great.
5
The problem with Pax-Americana is its burden was born by the American working class especially after 1972.
Pax America was a trade off where countries became political dependencies in exchange for access to American markets. Before 72 they had to have unions & similar social contracts. After 72 the elites quit caring.
Scroll down & see Graph #2 @ bit.ly/EPI-study
From 1945 to 72 GNP doubled & the median wage in lockstep w/ it. Since 72 GNP grew another 150% but the median wage has been flat. 90% of those gains went to the .001% tho it took the 100% to make them.
If pre72 was fair, post72 was unfair yet has been sustained for 47+ years. As some workers wages have gone up (health/tech) we can assume the broad majority face declining expectations for over 47 years.
This makes the inflection point of 72 a huge obvious dysfunction in our social contract. We’re talking a near majority here because in year 6 of Obama (2014) the middle class fell below 50% for the 1st time in decades.
This is blatant class warfare ignored by the media. So blatant it can be seen from Putin’s window in Russia. 47 year trends are not sustainable unless elites in both parties are complicit
Sooner or later a Trump (w/ help from Putin) or worse would come along & exploit this growing obvious seam in our society.
Trump’s tariff wars look to workers like he’s protecting their interest while he’s serving Putin’s interest by breaking up Pax Americana. Consider it a real estate deal on a massive scale.
9
As I read Mr. Krugman's piece, I am struck by one thought … this one: Even though it is written 'simply' -- i.e., for comprehension by non-dummies who and nevertheless are economics dummies (comparatively) -- trump would be lost by (not "in") its thoughts ... in the unimaginable event he would ever try to read 'them.'
Consequently, 'we' would still be at the loss to which trump 'puts' us in the referenced circumstances (among others) even if he were merely "weak" -- as Mr. Krugman reports -- and not malign (as he most certainly is, and as Mr. Krugman 'says' as well).
2
Good points as always from Mr. Krugman. Much more importantly, where is the cafe and what is he doing in that area? Vacation?
This amazing quote from Paul Krugman's article is the real cost of the dt administration.
"But where the Europeans are weak, Trump is malign. He’s working actively to make the world a more dangerous, less democratic place, with trade war just one manifestation of that drive."
Three questions must be asked is: (1) Why is
this happening? (2)Why is the US Congress, whose constitutional mandate is to hold the executive branch accountable for its obvious and continual attempts to destroy US democracy, not doing its job? (3) where are dt and his sycophants are really getting their marching orders? This painful process of national US suicide has to be recognized and stopped.
9
@Paul K
Politicians care about (1) their personal fortunes and (2) getting re-elected.
The welfare of the nation, and especially of the working class, hovers around (9) or (10) — unless, of course, there is a profit to be made or their votes are needed.
3
I appreciate this attitude. Nobody's perfect, everybody is making some mistakes, but some people are making a lot more mistakes than others. That fits my world view.
The comment on the effect of trade war on peace is one I'd take further.
The US found it could not effectively confront China in a new Cold War while tied to China's economy. So the choice was -- war. Break the ties, so we can fight.
Our neocons and incompetents are shrugging off the limitations that kept them from wider trouble.
4
@Mark Thomason
We actually started to confront China in a more rational way by introducing TPP. Next step was supposed to be to get EU on board and exert real pressure with the power of 65% of world economy, not the silly fight one-on-one, with so far nothing to show for.
Don’t equate the act of fighting with real progress, usually they are separate and not related. Just like Iraq war, nothing, virtually nothing achieved, just chaos and misery for everyone in the region.
4
@CarolinaJoe -- I agree this is not being done well.
I disagree about the TPP. I thought then and still do that it was corrupt, serving only the wealthy few who helped write it while it was kept secret from everyone not an insider.
Praise for the TPP is like praise for Hillary. It simply fails to understand what is driving voters into our future.
Pax must go in order to have the Republicans' war for 2020 elections. It will happen with or without the invisible tax.
1
At the same time, America has fostered numerous global companies that are to some extent or other bad actors, and we can't seem to rein ours in either (or don't care too). For example, the world might say to us "Would you please keep Facebook from promulgating harmful political lies in our countries," to which we would say, "Huh?"
5
It appears as though what the president is doing is just the logical extension of capitalism. Looking at the basis for a capitalist society, one sees that highest and increasing profit is the goal. One way to maximize profit is to increase prices, hasn't this been going on forever?, reduce costs of production, again there is no stopping it, or control markets, which is also becoming more common.
Here in America the increase in profits has reached a fine degree of perfection and leaves little new ways for corporations to maximize profit. It seems that market control is the big new method being attempted. The goal will not improve Americans' lives by raising salaries or lowering taxes but by limiting choice by attempting to stifle competition to benefit the domestic economy.
Having the largest consumer economy on earth, doesn't it make sense to limit the availability of competing goods to American products offered by domestic producers? In such an environment limited international competition will allow domestic organizations to have more control over the variables they are limited from doing now, i.e., controlling markets, increasing prices and more easily controlling wages to finally achieve to next level of capitalistic perfection. Be aware that reason for the existence of capitalism is just peripherally to produce products, services or employ workers; if capitalists could develop a way to create profits without any of those elements, rest assured, they would.
@Dick M ..China could easily decide, either for retaliatory or food security reasons, to have its state controlled or influenced entities advance the funds needed to develop large efficient capital-intensive farms. There are many areas in the world in addition to South America and Africa that could be used for expanding soybean and corn production, if the money for modern irrigation and advanced farm equipment was made available on very favorable terms by the Chinese.
Russia has recently made available an additional 2.5 million acres of farmland eligible for foreign investment. Russian officials said that they expect most of the farmland to be bought by the Chinese. Chinese officials have also suggested that American farmers would never regain market share lost in a trade war.
Were this to occur, American soybean and corn farmers and the areas that depend on them would be depressed for many years. Industries that sell equipment and other goods to farmers would suffer.
Many point to the depression in American agriculture in the 1920s that preceded the great depression as a precipitating factor. Even before any new crops from these Chinese agricultural investments came online, the prospect of the gluts they might cause would depress prices of farmland and sales of farm equipment. This could result in defaults and credit problems as well as depressing securities of entities that depend on a healthy agriculture sector..."
https://seekingalpha.com/article/4205253
3
@Dick M
They already do.
Most investments are not to build businesses, but to acquire silent ownership of existing businesses through the secondary securities market.
Very little great wealth grows from productivity. It comes from the unearned income of dividends and the trading of securities.
"But since I’m currently sitting in an outdoor cafe with my coffee and croissant, I thought I might take a few minutes"
Consider then how much of your work could be done that way. Would the peace of mind actually improve it? Not that I'm faulting it, but quality isn't easy in the best of circumstances.
We can give ourselves more freedom. We can live better. It isn't just about money or time at work. It isn't even necessary to be "at work" for many things. Some things, sure, but not everything, and ever less so.
We won't get the up side of changing tech unless we seize it, carpe diem.
3
@Mark Thomason
"Carpe", despite popular myth, does not translate from the Latin as to "seize" but rather to "pluck" ( as one plucks feathers from a hen). By the way, what is the "upside" of changing tech? To what? The wheel? Well, that was one piece of tech we did find an upside to...unless you found yourself on the downside and underneath one.
1
If we start with the reasonable assumption that Trump does not have available to him the quantity and quality of mental resources possessed by Professor Krugman, then to answer the question, "Why does Trump do what he does?", we must look to factors other than reason and knowledge.
A good explanation of his behavior is described in the work of another Nobel laureate, Daniel Kahneman, who adapts psychology to economic decisions that should be based on reason but instead are purely emotional, or as Kahneman calls them "Thinking Fast". In other words, Trump 'doesn't need no stinking reasons' for his behavior, he'll just make up a story to justify it after he does it. And whatever Trump does is right, because he's Trump, don't you know?
One might imagine the thing winding up like the climax of "The Third Man", where Harry Lime is pursued like a rat through the sewers of Vienna, finally cornered, and finished off.
The truth has a way of winning out, whether at the ballot box or the legislature, but it can always use a little help....
10
Good column Dr. Krugman -- enjoy your vacation!
I think a crucial, unaddressed question is why is Trump and his team pursuing the end of the world order? Why tear down something that worked so well? The answer is money (surprise!). In a world without rules, the fellow chasing the "main chance" can score big gains. Rules and societal norms only slow you down. This "wolf of wall street" attitude is fundamental to the new GOP, and that is frightening in that it may become a lasting ideology.
6
Since China forbids Westerners from becoming citizens in their country, why should the West let the Chinese become citizens here? The trade war is lopsided in more ways then just economics. We should'nt have to stand by and let the Chinese take advantage of our naivety.
3
@Tony
Foreigners can become Chinese citizens.
http://www.clic.org.hk/en/topics/immigration/chinese_nationality/q6.shtml
This is a thoughtful and well informed discussion of tariffs and general foreign policy. Sadly, this area is too complex for the likes of Trump and the non-economists he has surrounded himself with. Hard to tell what his base will make of the trade war. Clearly they are the most hurt by it, but when complex issues are reduced to two word chants its hard to know if they understand anything.
22
The men who led America through the Second World War, followed by men who served, put in place the policy that what’s good for the world is good for America.
Not because they were libruls, but because they knew the costs of war.
That’s gotten us 75 years of no depressions, no plagues, and no world wars.
It’s possible that it’s time for America to set a new course. It’s impossible to believe the right person to do that is Donald Trump.
10
@Robert Weed
I was with you until the third paragraph. Thanks to the embrace of trickle-down theories by Republicans (and even Bill Clinton), we have had three recessions; one at the end of the 1980s (as predicted by Reagan budget director, David Stockman), another at the end of the 1990s; and, then the Great Recession of 2008-12). And every time the Republicans create an economic crisis, the Democrats get elected to clean up the mess. But that requires clawing back tax cuts from the rich. Then, anti-tax Republicans pitch a fit about raising taxes, spend lavishly on election slogans against those taxes. They inherit an economy on the mend and rip it apart at the seams. And so it goes.
2
@Robert Weed can you present some evidence to base this on? Something from your understanding of global economics?
@Robert Weed Trump works to make himself feel important and powerful and admired, and to rebuild the wealth he earlier lost through bad judgment, impulsive choices, and overall ignorance. He continues his usual approach now that he is president. The GOP does not care.
Agree with everything Dr. Krugman said. But I don't understand this. If the cost to produce good "A" is the same in two countries, or unequal by an amount less than the frictional costs of shipping and tariffs, then there would be no reason to trade. Comparative advantage says that, even when this is the case, a country will still be better off to trade for "A" if it is better at making something else, say good "B". In this case the country should reallocate resources to make good "B" instead of "A'".
Here is the part I don't understand. Nations settle trade accounts in currency, almost always the dollar. Only the USA can produce dollars (or US debt, same thing), and it does so at no cost. So why make anything for trade at all, when the USA can just create dollars to settle trade accounts?
2
@Charles Tiege
Foreigners wouldn't continue to accept nearly as many dollars in such conditions. The dollar wouldn't last as the primary reserve currency.
Nations settle trade accounts in dollars because foreigners can do something useful with those dollars. Buy things made in the U.S. Invest in the U.S. Stick the dollars under the mattress or use them as local currency because if everything goes down the tubes at home, probably the U.S. won't have gone down the tubes as well.
If you stop making things for export you've eliminated the first big reason, the biggest one. Probably the third reason as well, as such a policy would smack of a decadent society in decline.
4
I believe that the main issue behind recent trade war antics is the matter of employment and jobs. Let's call a spade a spade. To increase the latter (without considering innovation) is to grab someone else's market. To me that seems like a war and war (in whatever form) has consequences, both intended and unintended.
2
Good point by Prof. Krugman about the political benefits of opening and integrating goods markets.
He might also have mentioned how much political resistance there is to this supposedly merely technical matter.
Anyway, let's remind him of what he has said about integrating goods markets the next time he says that integration of currencies is a political question.
1
I'm not so bearish. World peace is built on a much sturdier foundation than temporary American dominance. There is the fact that most wealth today is based on trade and intangibles, so countries do not have the same incentive to conquer land and resources (the leading cause of war in history). There is rapid global aging, and older people are simply more risk-averse and peaceful than younger ones. And there is the threat of mutually assured destruction, which creates a strong incentive on all sides to de-escalate.
The largest threat to global peace is global poverty. If poor countries in Latin America, Africa, and the Middle East had followed the same growth trajectory as China, there would be no migration crises or terrorism today. As of now, poor countries are still showing strong growth and the gap between rich and poor countries is gradually shrinking. So I believe the next 50 years will be more peaceful than the last 50.
5
@Aoy: China gets way too little credit for voluntarily limiting its own rate of population growth.
3
@Aoy climate change will be a major factor in how that works
Krugman's claim that trade policy is about democracy and peace is ludicrous. The biggest beneficiary of US trade policy over the past 20 years has been China, a notably undemocratic country. Our trade policy has driven the growth of the Chinese economy, and has helped to build China into a powerful strategic rival to the US.
Some years ago, New York Times columnist Tom Friedman claimed that trading with China would lead to the democracy and freedom in China. We know how that worked out. China has also been the greatest source of growth in greenhouse gas emissions over the past two decades, and their emissions now exceed ours.
Another big beneficiary of larger trade deficits is the New York financial industry. They profit from financing deficits. I think that the banks are the root cause of the hysterical reaction to Trump's tariffs on China. They know a shrinking deficit will mean less business for them. I think the banks use the power they have over media companies like the indebted New York Times to ensure the media opposes tariffs.
The goods trade deficit with China was down a little in Q1 2019, but it is clear that higher tariffs are required to really start shrinking that deficit down to zero. I think Trump is wise to raise tariffs at his point. He should then wait for 6 months to a year to see what effect the higher tariffs will have. In the long run, eliminating our trade deficit with China will mean more American jobs and higher wages.
3
@Schrodinger Good analysis. Thanks.
2
@Schrodinger
I don’t know if anything you write makes economic sense. It will take 5 years at least to see the real effect of these tariffs.
If we eliminate trade deficit we’ll get stagnation with high prices, not more jobs and higher wages.
2
@Schrodinger
It's about "Democracy" and "Peace" ... No wars and increased freedom for citizens at home.
By this standard, China hasn't attempted to attack Japan, S. Korea, SE Asia ... They are trading with them (often unfairly). the lack of conflict has allowed prosperity to rein throughout the region.
The citizens of China are much more free today than they were 4 decades ago. They are not free by western standards, but they enjoy much more freedom and leisure than in the past.
2
How about attacking the insane requirement that American corporations transfer their technology to China in order to do business there? Who came up with the idea that this was in anyway permissible? Why didn't anyone in government or business try to stop it? Once the technology is completely transferred to China, they can then out-compete American business internationally and our share of sales of goods and services should shrink downward rapidly.
I read a quote from a Chinese business person doing sales to a furniture manufacturer in North Carolina. The Americans pushed and pushed for lower prices. The Chinese business person said at the end of the process, "I have never seen such greedy people in my life."
American business is short term, profits now!, oriented. Nothing else matters except keeping the stockholders happy and paying big salaries and bonuses to the managers. This is one reason that Asia has risen higher and higher while America has exported its electronic assembly business there: American companies are not happy with profits, they want big profits or they simply pass up new openings while Asian companies invest and work for years to get those opportunities.
Except for our relentless inventiveness, the long term prospects for American business are not good. Small, underfunded companies look for new opportunities but the big mega-corps just rake in money and avoid risky new ventures so their stock price remains high.
10
@Doug Terry I have occasionally done business in Taiwan, China, Japan and Korea. My experience was that they were incredibly polite and civil. I never once felt that I had been shorted in quality, price or timely delivery.
At the same time, their civility made it possible for me to engage in what felt like a relationship of mutual benefit. That is not to say that there were not intense negotiations that delved into every detail of my expectations. However, when that negotiation was finished, it was over. Both side were satisfied and didn't continue to seek advantages outside the scope of the agreement.
On the other hand, Americans are the nastiest business(wo)men I have ever dealt with. They would constantly be scheming to find another means to squeeze me for more than our original agreement.
18
@J.I.M.. I've lived and worked in China as well. And agree with your points about the lovely Chinese people. But you don't address the very rational point of the original comment, which refers to a real policy of doing business with the Chinese- that it is mandated that you transfer technology, and that this is absolutely insane, and a menace to our national security.
3
@Doug Terry Our relentless inventiveness should have long since been turned toward environmental remediation and protection against climate change. Neither of which are issues the GOP is concerned with.
6
So while trump does his Nero impersonation and burns down those alliances that took decades to formand and to work, McConnell and his fellow Republicans sit by and watch our institutions burning. One has to wonder what is in it for them?
25
@Steve judges
Krugman accurately relates Trump's obsession with "winning" to the decline of the "Pax Americana" that has helped preserve world peace for the past seven decades. Ah, now it occurs to us. What we are suffering from right now is "Pox Ameriana" or, more grammatically correct, "Pox Americano." Same pronunciation, radically different meaning. That is a new monitor to describe Trump. And It is indeed a disease that is spreading.
10
@C.L.S. Make that "moniker," not monitor. I think we could also expand upon the "pox" metaphor, such as "smallpox," a scourge faced by humanity in past centuries, vs. the "Large Pox" that has currently infected the White House.
@C.L.S.moniker?
How about imposing these tariffs for politically sensible reasons but then returning the tower forever new to the customers.
1
“...the ludicrous pretense that they endanger national security..”. Perhaps it is a pretense when used by this president, against Canada. But looking at our incredible reliance on foreign manufacturing, pipelines for parts- reminds me of Billy Mitchell and his warnings during the inter-war years. This may be a different weakness, a different unpreparedness, but Trump’s broken clock is right to at least force a discussion of national security.
We traded with Japan, Germany before WWII. We scrambled to build the giant supply resources that armed us, and the allies after that first year. We all sat silent for those pre-war years, watching Germany grow and invade, Japan grow and invade.
Costs for imports. Costs for exports. A strong dollar. What’s the cost to allow China to continue to enable North Korea’s missile programs? Threaten Taiwan, renege on Hong Kong autonomy? Build artificial islands for questionable uses?
What’s the cost to South Koreans, Japanese? What’s the cost when China can shut down our access to thousands of basic products? A tax? No, it’s a warning. And it’s indeed ludicrous that we seem to want to continue any large partnership, funding via business investment, with a bully.
Tariffs are taxes. We'll just note here that all those GOP smaller gov't people, from Mitch McConnell to Paul Ryan to Grover Norquist to the whole lot of the Republican Senate and House members are largely silent on Trump's raising of taxes.
So, the only conclusion one can reach is that they actually only oppose taxes proposed by Democrats. Their own taxes are perfectly okay.
35
"And Trump’s trade war should correspondingly be seen as part and parcel of his embrace of foreign dictators, lack of respect for our allies, and evident contempt for democracy, at home as well as abroad....Trump is malign. He’s working actively to make the world a more dangerous, less democratic place, with trade war just one manifestation of that drive. And the eventual negative consequences for America and the world will be much bigger than anything we can capture with economic modeling of the effects of tariffs." If we survive this into 2020, please, America, remember the gerrymandering, the voter suppression, the hackable voting systems, the electoral votes annulling our popular votes for a different choice, the senate majority leader allowed to steal a supreme court seat and laugh about it. And vote for the person who will stop this enabling of these happily malignant destroyers.
18
Not only will American taxpayers pay more for everything from China but Trump is working to destroy farming in America. China will probably retaliate with tariff's on soybeans, hogs, corn, and other farm products if they buy much of anything from the US now. They have turned to other countries for their ag products which will hurt our farmers.
13
@Jacquie: Chinese investors might wind up owning US farmland for cents on the dollar.
@Jacquie And yet all the farmers I heard interviewed on the subject still support Trump. Their ignorance is astounding. It's hard to come to terms with having made an abysmal choice, and suffering as a result.
History has shown us that that trade wars lead to shooting wars. This may be provocative, but I think it prudent for Democrats to draft a bill to re-start a military draft. There should be No college exemptions, and No bone spur exemptions. In a high tech army, there will be plenty of roles for everyone. The lesson is that if you want to elect war mongers, then you better be willing to put yourself, your kids, or your grand kids on the line. It’s the proverbial patriotic high ground for the 2020 election.
25
@EW
Bad idea.
Those who did not vote for the war mongers will be just as much at risk as those who did.
The draft is a con by the ruling class to create armies of working class cannon fodder for its imperialistic aims.
1
Yes, hey here, I have a novel idea - let’s get rid of Trump. When an employee deliberately messes up the books, breaks a machine, or steals from the kitty you fire him, right? This is not a television show where the object is to entertain with derring-do, sleight of hand, and heroic outcomes despite long odds. There are real effects for bad behavior, despite the bang-bang shoot-em-up red-faced TV clown who has so captured Americans’ hearts by occasionally spouting patriotic jargon and making a million-bazillion dollars by cheating and making it look soooooo easy. I often hear the ice cream truck in my neighborhood trolling around playing it’s bells to the tune of The Entertainer, an old movie about an elaborate con-job, a swindle. Is this what we Americans want to teach our kids?
12
@Pat
The tune was Scott Joplin's "The Entertainer," but the movie was "The Sting."
It was not about swindling honest people, but about conning a criminal in order to bring him to justice for murdering a friend.
Mr Krugman
Now I am quite surprised that neither you nor other enlightened commentators in the press make mention of the influence of Steve Bannon on Trump's policymaking.
To wit : Bannon adheres to a fatalistic and bleak vision of world history where events run in fixed cycles, including warfare. Mix this with John Bolton's barely concealed desire to bomb the Iranian regime out of existence, along with Mike Pence's evangelical eschatology. I happen to feel that peace in our time will turn out to be a cruel joke and a distant memory when these men do everything in their powers to fulfil Bannon's prophecy of a great tilling of society before improvements can be realised. Don't underestimate the power of unhinged mystics !
10
"But where the Europeans are weak, Trump is malign. He’s working actively to make the world a more dangerous, less democratic place, with trade war just one manifestation of that drive." Yes, this is exactly what the issue is. Trump is malign. He's been a malicious person, a malicious president and, before that, a malicious businessman. He has no problems double-crossing others whether they are countries or "colleagues".
He has appointed incompetent people to serve in his cabinet. The GOP has given these people its blessing. He is using the government as his personal servant when it is he who is supposed to be a public servant. He was not elected to serve the business community. He was not elected to be president of some of the people.
Whatever example America used to serve, as a place where people from many backgrounds could live in peace or where even the poorest person could work his/her way out of poverty, Trump has made it evident that those ideals mean nothing to him and the GOP. He and they have sought to weaken any law or regulation that interferes with the corporatocracy doing whatever they please. Worse is how we've treated our allies, treaties that have been made, etc. I believed that W had frittered away the good will we had after 9/11/2001. I was wrong. Trump has turned their good will to ashes.
5/11/2019 12:28pm
5
At the close of the Arctic Nation's Conference last Monday instead of the usual joint statement Mike Pompeo offered a dissenting opinion in which he declared an American intention to pillage Canada. He called Canada's claims to the Northwest Passage illegitimate even as the other Arctic countries Norway, Sweden, Finland, Iceland, Denmark, and Russia expressed their support of Canada.
My years in Canada's Northern Frontier informed me that for many of us Canada's national anthem is Stan Rogers' Northwest Passage. I had comment earlier this week that for myself and Canadians like me Pax America is dead as a door nail even as last week I had spent a wonderful week in DC.
China is not our friend but the USA is everyday more our enemy rejecting our values and ethics and offering ever more challenges to our legitimacy as a nation.
Even as I have often cited Jon Ralston Saul's The Collapse of Globalism and the Reinvention of the World, while in Washington I read Saul's The Comeback a book about the re-establishment of Aboriginal people and their ethics, values and philosophy to a proper place of honour in our Canadian Mosaic.
Even as globalism has made us one of the wealthiest, healthiest and best educated places on Earth, America's greed, selfishness and ignorance roils and threatens our peaceful and welcoming nation.
Trump is not the disease he is the symptom of a disease that has lead your nation to not understand that in our universe there is lots of magic but no miracles.
28
There is a tidal wave of big money coming at Trump and the Republicans in 2020. Let’s hope they can swim because the water will be deeper than the water flooding Trump Tower by the turn of the century.
Collateral like real estate is in foreclosure when it is flooded by rising sea levels. Banks fail worldwide when the properties and businesses lose value on account of flooding.
Does your lender know that global warming is a big foreclosure notice?
2
@Robin Foor
Regardless if you know it or not, we are still in the most recent "Little Ice Age". The Earth will get warmer, but most likely eventually get much colder...so Trump Tower (and the rest of the northern portion of North America) will be covered in (just a guess) 100 to 500 ft of ice. Of course, eventually the sun will implode (or explode - we still don't know why it hasn't so far or what continues to drive it's nuclear forces). But eventually the atmosphere will freeze entirely. One supposes it will be a bit tough to get around without a icepick. Personally, I'm simply looking for my lost shaker of salt. So long and thanks for the fish.
@Mark Shyres
The Earth is indeed in an interglacial period of an ice age.
But that will not stave off global warming due to made-made CO2.
The next glacial period is not due for another 50,000 years.
This goes along with the theory that "markets are rational because people are rational." Milton Freidman's rant of four decades ago. Economics largely relies upon rationality, that people make rational decisions. I propose that is a false assumption. There are literally countless examples of the irrationality of human beings. And nations are no better than the people of which they are composed. Irrational humans = irrational nations.
Push come to shove, nations have cultural personalities and will, except for relatively short periods, engage in activities that are beneficial to their own nation. Well...just like people...self-interest often conflicts with "community" interest.
What we may be observing here is the beginning of the fall of the "Tower of Babel". Obviously, what Americans see as important to their well-being will in most instances NOT be in the best interests of some other cohort/culture/nation. The very fact that humankind is more often than not genetically driven toward self-interest spells ultimate doom for a global economy. In the meantime a select group of individuals are reaping fantastic wealth they can later use to insulate themselves and leave everyone else fighting off the zombies.
3
@Wes
People are often rational in irrational ways. For example, they choose their investments carefully within a system that melts down every decade or so, but are careless or ignorant about the operation of the whole system that makes it melt down every so often. The biggest danger to investments is a general meltdown; losing less than others in such a meltdown does not preserve a retirement nest egg. But no investment advice promotes itself as preventing a meltdown, only as enabling escape or mitigation of the meltdown. But if everybody followed good advice and escaped from the meltdown, the meltdown would not happen. Everybody cant be above average or smarter than the average investor.
So investors generally are rational within an irrational context. They take care of small individual risks while ignoring the big general risk that is lurking, waiting to pounce. Milton Friedman and Alan Greenspan were too smart not to know this, but they were ideologues with interests and values to defend, so they ignored some truths rather than thinking them through.
2
I am not going to resign myself to believing the state of being is purely Akratic. The impulsive and reckless behavior that is like a fungal toe-nail rot spreading to deform and overtake Hull’s post-WWII vision of peace can no longer be neglected or shrugged off as untreatable as has happened in the case of Hungary.
1
Free trade led to the peak of the British Empire. And British money helped build the rail roads in the US. China though is a special case. They have a history of exploitation by the West. Recently the West have sent its manufacturing jobs to China to avoid labor costs and control labor disruptions. The West's corporations got cheap products and high profits. The Chinese use of authoritarian capitalism cleverly created a trade juggernaut through espionage and creating a middle class of their own. Xi has tied his prestige to China's continuing expansion of trade at the expense of the USs trade hegemony created after WW2. Trump has an issue with legs because of American anger at having China succeeded while the American Dream seems to have disappeared. Part of what made free trade work for the US was the power of American consumers. But with wealth disappearing into the pockets of the richest, consumer spending could become a weak link in the chain with growing public, corporate and consumer debt. As well as a giant US trade debt which Trump's blunderbuss approach has not improved.
11
True, Paul. However, beyond the beyond, the success of Trump politically, and the weakness of Europe's response to assaults on democracy, are both driven by larger forces. In particular, climate- change, and war, and societal anarchy (both in part due to climate change), have created massive immigrations that cross nation-state borders, amd create fear and loathing amongst the people already there. Democracy is wounded, or destroyed, when fear and loathing of immigrant 'invaders" take control of a society. Trade wars are canaries in a coal mine - dying from bad air,
and the terror of there being nowhere to go.
7
When China saw Trump publicly criticize Powell at the Fed in order to stall rate increases, they knew Trump was worried about a weakening US economy. So, they slowed down trade talks. Tariffs will increase $prices in the USA on imports from China and put more pressure on the US economy. That’s good for China’s negotiating position. Obviously, they read The Art of The Deal and Trump, the co-author, didn’t.
18
This is nothing more than academic nonsense that is completely detached from the reality that the toxic combination of neoliberal economics and "free trade" and globalization decimated the American middle class and is destroying capitalism, undermining democracy, fueling the rise of authoritarianism, and destabilizing societies in developed and developing countries alike.
All essentially because of the utterly ridiculous theory of "comparative advantage".
Globalization as implemented over the course of the past thirty years was the worst idea since Communism. We are just now beginning to reckon with consequences of its spectacular failure, and are now entering one of the most dangerous periods in history as a result.
Let this column represent Exhibit A for why economists are a dangerous threat to humanity at this point.
1
@TB
It is a fact that during the time that mercantilism reigned that the world suffered multiple wars. The article advocates for confronting China's trade practices and that includes its failure to protect intellectual property rights. The U.S. and the world under an increasingly global trade system, had no major wars and saw a large rise in world economic growth and prosperity. Some of the problems that are attributed to 'globalization' are due in large part to failure of our education, social, and health policies or lack thereof.
10
General Motors sells more cars in China than in America. With healthcare costs so much higher in the USA versus other countries, it’s cheaper for American companies to move more more operations outside the USA.
2
@TB
Economics assumes that growth is good, the cure that solves all other problems (or at least provides the resources to do so). Growth is now bumping up against the finitude of our large spaceship.
We need an economics based on the reality that growth can be cancerous and eventually destroy the entity that is hosting the growth. This would be an economics based on controlling growth of resource use (and population) to form the stable, self-limiting system our home planet needs to keep on being a livable home for its species including us.
1
Trade negotiations looked like going fairly well. Mr. Trump, always the optimist, kept saying a deal was in the making. The Chinese, seeing that he looked overly eager, decided to see what he was made of and backed out of several key agreement elements thought already settled--Mr. Trump said, 'nothing doing'; discussions continue. Democrats, ever seeking to weaken and ultimately depose Mr. Trump, reflexively jump to the defense of the Chinese and brand him as incompetent; the Chinese see the Democrats as their unwitting allies. Meanwhile, 2020 keeps approaching, the Chinese trade deal is now a domestic political issue, it becomes more and more in the Chinese interest to delay further progress until after the election. If Republicans win, go back to work on the agreement; if the Dems win, no need to agree to anything.
2
@Ronald B. Duke. Do you really think that China, during the last week, decided to see what Trump was made of? They and the whole world know what he's incapable of. This is the guy who can't fire someone in person, unless it's on a scripted reality show.
Criticizing Trump and his "policies" on trade, disastrous for manufacturers, U.S. farmers and our Allies, is NOT defending China. It's defending America.
2
@Ronald B. Duke
If only Trump understood what he is doing.....
Couldn't agree more. But I'll add that in a way we saw a precursor to this with George Bush's invasion of Iraq - a move likewise motivated considerably by personal reasons and accomplished through considerable deception. The continuing effects (diversion from attention to Afghanistan, continuing upheaval in the Middle East costing us many billions every year) - are just further evidence of the broader horrendous Republican mismanagement of this country over the last 20 years.
90
You can't claim credit for the benefits of trade and disown its negative effects, namely deindustrialization throughout the Western democracies and rampant inequality everywhere. It was dissatisfaction with the consequences of free trade and open borders that gave us both Trump and Brexit. If free trade sows the seeds of its own demise, what good is it? And it was, after all, a dispute over an EU trade deal than spawned war in Ukraine.
5
@Larry The problem has not been deindustrialization, an inevitability given both technological advances and also the nation's graduation from that phase of its development. The problem has been the U.S. economy's failure to adjust to its evolution into a more heavily service-oriented economy. While exotic services such as intellectual property have been richly rewarded, more prosaic services--which are more comparable to assembly line work in an industrialized economy--have not been rewarded at rates comparable to those paid to the assembly line workers of yore. This is where unions (or something comparable) will need to appear and is why the current unrest exists.
In the long run, industrialization will account for a smaller share of the economy in all developed nations (and, eventually, in all nations globally) and will be dispersed among the nations with a smaller and less environmentally negative footprint as technology improves. The share of jobs provided by traditional industry will decline everywhere.
We need to stop thinking of industrial jobs as something special and start properly compensating employees for their time given to service jobs.
9
We must be careful not to personify History.
Fact is, if you look at the macro level, the USA is essentially stagnated since 1978.
Yes, there was some sort of "growth spurt" in the 1990s because the internet popularized at the same time the USSR dissolved (which opened a new market in Eastern Europe). That period -- the infamous "End of History" era -- proved temporary, as the dotcom bubble popped up in 2001 and then the whole financial system entered into almost total meltdown in September 2008.
The American people reacted on both end of the political spectrum in both recessions: after 2001, they elected a very aggressive POTUS, who would adventure in Iraq and Afghanistan with the promise to bring back glory of conquest and a lot of loot (cheap gas) to the beleaguered American people. After 2008, they elected a relatively "peace and love" POTUS, with a narrative of peaceful change and prosperity through domestic reforms and a "we can do it"/"hope and change" slogan.
Neither of them were successful. Nor could they. Fact is, the USA is getting old.
20
@VK you have a point. As someone who has lived through the Reagan era, Carter, and more, I've felt that we stopped growing and improving in the mid 1980s. We made some very poor decisions and now they are coming back to bite us.
4
@VK
I an not sure we had “hope & change” being implemented at any point.
Since Reagan we have been implementing mostly conservative policies, with Obamacare being one exception. Look where we are, low taxes, huge deficits, low regulation, Middle east devastated by wars, etc. Many of those policies, including all trade agreements, were dictated by our corporations. And failure after failure we are just finding something new to blame, usually liberals, and come up with another silly conservative policy to try. It is our system of laissez faire capitalism that has been failing, and needed 22 Trillion of borrowing to stay afloat.
1
@VK
The US is, in fact, getting old. The youngest baby boomers are in their mid-fifties, and the cohorts that come after are smaller. Older people can't rationally put their money in high-risk, high-reward investments thinking they'll have time, if things turn South on them, to start over.
The traditional solution for America has always been immigration, which is disproportionately made up of young adults with their prime working years ahead.
So what is Trump's Big Idea? Of course. Stop immigration!
1
what you are saying is that trump is running the country the same we he ran his businesses..... recklessly and in the end, without regard for his lenders and business partners. as the banks quit lending to him so will the world's more reputable nations refuse to deal with us.
47
Once again, Trump's actions make no sense until we realize this result is exactly what Putin wants to see happen.
34
If we can't even deal with the likes of Donald Trump in our own community, are we up to providing the kind of leadership the world needs?
28
Watching Trump undermine a system of international trade and cooperation that has since 1945 lifted billions of people out of grinding poverty and given billions more access to some of the material security now enjoyed by the West is incredibly frustrating. We and our allies should be trying to figure out how to make that system work more equitably and sustainably for more people. Instead, U.S. policies are at the mercy of a man who is a lying, ignorant, bigoted xenophobe – a man who lurches from one policy position to another based on the last thing he sees on Fox and Friends. And there's not a darn thing I can do about it until 2020, and maybe not even then. Hence, the frustration!
36
@mather One has to ask: Who has something to gain from this? Two possibilities: Putin on the world political scene, and Trump and his family on the local, manipulating the markets level. He well knows (and has played this game on a smaller scale a couple of decades ago) that his tweets and threats can drive the markets down - so he can buy lower, then tweet the opposite to drive the market back up to then sell higher. How many times has that happened in the past few years? Tax Returns can help with seeing this - remember, this is the only president who has refused to divest of his business activities while in office.
31
Too good - Krugman crying alligator tears over Pax Americana while tapping out his column from a cafe in France. Spare us the tendentious lectures until the dust clears.
I guess this was a better option for him than revisiting some of his prior columns on the economy, tax revenues, wages and income inequality now that it’s ~18 months after the new tax law. Give him credit for dogged persistence in taking himself seriously
1
@Robt Little
Our economy is in deep trouble if it needs 1 trillion of borrowing to function. Isn’t a good economy supposed to generate wealth rather than stealing money from future generations?
A conservative praising living on credit? I guess this has been true conservatism all along.
Sorry Professor, but I disagree with your assertion that “the theory of comparative advantage gives it an amount of mind space somewhat disproportionate to its actual economic importance.”
IMHO, for all of Reagan’s rhetoric and “trickle down” economic malarkey about the benefits of his “supply side” economic policy to the American consumer, the bottom line is Reagan’s tax policies were premised in large part on the theory of “comparative advantage,” specifically third world labor markets “comparative advantage” in labor costs over the US, which happened to coincide with his contempt for “Unions” and the average working class “Union” workers ability to leverage their collective bargaining rights to obtain better working conditions, competitive wages, and health and pension benefits that are now largely non-existent.
Granted, Reagan’s supply side policies and opening American markets to foreign products is the opposite of Trump’s current Trade War on foreign producers. However, Reagan’s “open door policies” created the current situation for the devaluation of the cost of American labor and in that sense Reagan’s policies were a “War” on his own working class citizens, and were best summed up by Perot’s classic “Great Sucking Sound” referring to the loss of American jobs.
5
Try a thought experiment. What if Trump were a Manchurian Candidate tasked by Putin with ruining America? Why not have him start a trade war to bring down the American economy? For dessert, he could then start a war with Iran that would be even more disastrous for America than our last proxy war for Israel was in Iraq. Just sayin'.
17
Thank you Paul - an excellent article. Simply put, the Laws of Economics are like the Laws of Physics. They are immutable and are well know. Clearly beyond the capability of Cadet Bone Spurs to understand and comprehend. The Dunning Kruger effect on full display. Our Oval Office occupant clearly afflicted with that syndrome. Then add Supreme Narcissism and you derive a rare genetic combination. Those in turn combined with his twitter addiction, and an ideological support team - give a fully demonstrated and clear recipe for disaster. The chaos continues. Oblivion rules. Sad deal.
5
Yes, the tariff trade war can spill over into international affairs and Machiavellian power plays.
Let's look at the possibilities. China and Iran become closer aligned, they need each other, Iran has a need for advanced telecommunications / industrial products and China needs oil. That one is pretty easy, and if the oil is loaded on a Chinese vessel I don't think the US Navy is going to impound the tanker.
China can play the North Korean card. China can keep the US off balance by supporting, trading with North Korea and China gets coal from North Korea. China can simply state to the US, "Your rules regarding terrorist states don't apply here to this part of the world."
I'm sure there are quite a few senior engineers in advanced technologies which would just love to get some big pay days working for the Chinese. You can do it over the internet now a days. And why not when corporate executives make $15 million a year and you make a measly $175,000 a year?
7
Sorry, but the European Union is not a state, but a union of sovereign states. All decisions within it have to be made unanimously. This is why it can not act decisively against the fascistoid rgimes in Hungary and Poland. The EU has no mechanism to expel one of it's members on moral grounds. This was not deemed necessary, and regarded as an undue interference in internal affairs when it was founded back in the 1950ies. And: Please do not forget that US governments from Bush senior, via Bill Clinton to Bush junior pressured the EU heavily to take in the eastern European countries, even if they were not really ready, just to get them away from the Soviet/Russian sphere of influence.
Anyway, there are promising signs that at least the situation in Poland will resolve itself the same way the Donald Trump problem will - hopefully - resolve itself: By democratic elections.
16
What Trump gets most wrong is thinking that manufacturing is the backbone of our economy, instead of a minor part. When in fact, less than 7% of the US workforce is engaged in manufacturing at best. The actual manufacturing workforce on factory work floors is less than 4% of the US workforce. Meaning, only 1 in 25 workers in the entire country are deployed on a factory work floor doing actual factory work.
The reason is there is very little profit made in the actual manufacturing. A $150 pair of shoes made in China comes out of the factory costing Nike, Brown, Adidas, New Balance, et al., about $20. Shoes companies have no interest in manufacturing shoes, but they do want to design, market and sell those shoes and that's where the other $130 per pair comes in. The $130 is the money that goes to American shoe company designers, marketers and sellers, and yes, profit. The reason why American companies manufacture less and less in the US is that there is little to no profit in manufacturing most goods. Yes, China manufactures a ton of stuff, but they make a pittance of the profit on the stuff they make for the world compared to the profit the world makes on the stuff China makes.
Why, in the name of sound economic or business sense, would we ever want to reimport profitless manufacturing? China can keep the peanuts, and the US can keep the steak. As long as the US continues to make a ton on the stuff China manufactures for us, I say they can have all of it.
7
How about this: major household appliances used to be built here and were excellent quality, and could be repaired by Americans. Now that category is imported junk, lifespan 10 years, not really designed for maintenance. And the final insult is they are not inexpensive, and the consumer has to pay to have the short lived beasts hauled away.
2
@karen The latest tariff was on imports of washing machines from China and Korea. The effect was that Whirlpool, patriots that they are, raised the prices of their domestically produced washing machines and driers by the full amount of the tariff. Whirlpool now owns, among many other brands, Kitchenaid and Maytag, whose products were both effective, and 'just worked', essentially for a lifetime. (This was 15 years for a dishwasher, washing machine, drier, mixer. . .)
My recent purchases after a move are falling apart after 3-4 years of use.
1
@karen. You sound just like me in the 1970s and 80s when I complained about the quality of a lot of American made stuff, cars for example, in comparison to the foreign quality and value.
Is a tariff simply a tax, though? I am forced to pay taxes, whereas once a product becomes too expensive due to tariffs, I can choose to not pay those by not buying the product. As far as I know we are not looking at tariffs on basic necessities which I have to buy in order to not die, rather on luxury goods, which I don't really need or can get somewhere else. I think this makes justifying calling the tariffs simply a tax more difficult than just proclaiming "They are a tax period."
2
China is making much more than luxury goods. What percentage of what’s on the shelf at Wallmart or Costco is made in China? A high percentage!
3
@Mobo
Yes, until your washing machine dies. Then you'll pay the tariff tax.
Yeah, except America's economy and middle-class were never better then before "free" trade when America engaged in protectionism. The two biggest mistakes America has ever made - economically - were "free" trade and giving China MFTN status. Short term pain for long term gain. Maybe Mr. Krugman is happy being China's indentured servant but most Americans are not and are actually behind The Donald on this one.
@Sparky
Earth to Sparky -- so, you're advocating an economy in which a socialist dictator operates the levers of trade: American consumers buying only from American manufacturers or highly taxed foreign sources (or perhaps those foreign sources who find favor with the socialist dictator) while the rest of the world closes it doors to us. Sounds like Venezuela. Hoo, boy, talk about indentured servitude.
@Sparky
It is our system, where corporations write trade agreements, strongly supported by GOP, that has been at fault.
You need to understand how the system works and who is supporting it. American voter usually has no clue and blames the side he/she doesn’t like.
Trump is just malign. Surely Ross, Mnuchin, Kudlow and others around Trump can explain how tariffs work and that they are contraindicated. And why would he expect others to accept a deal with him when he has unilaterally rejected the one in place (Iran, TPP, NAFTA, Paris)? Trump and GOP values are incompatible with democracy and with Pax Americana. He is drunk with power and now desperate to keep himself and his family out of jail - a bad combination for a malign U.S. President.
36
@APMinPDX Spot on. Thank you.
Perhaps a bright side to this mess can be found. Maybe US consumers will face higher prices on things that they really don't need and decide not to buy them. The economy is built on fluff sales (have you walked through Walmart lately?). Less shipping of useless items, less generated trash, and less focus on the unnecessary things in life all seem like positives to me. The planet has a finite carrying capacity, so maybe trade wars can help bring this basic fact into focus for all of us. Local economies are much more sustainable than diverse transport driven economies. It's time to think about giving the planet a break from our collective destructive behaviors.
8
@John
Yes.
Remember when Mt. St. Helens blew? Someone owned the top of the mountain. And then they didn't.
Gobal warming is that explosion. These conceptions and discussions are a fun exercise over morning coffee or an afternoon beer. Meanwhile we fiddle while Rome burns.
1
Thank you once again, Mr. Krugman, for illuminating NYT readers about such a complex string of events. I also find the comments interesting and wish I had enough drive to get my ph.d. Who knew I would find economics fascinating? Thank you, also, for taking the time during a cafe interlude on what I hope is vacation. All Americans need a vacation from the ugliness we’ve been subjected to since Jan. 20, 2017.
12
This is a really insightful well written piece. Thank you.
5
The republicans and the President are playing their own little game of ''Socialism'' - Full stop.
What they are doing essentially is deciding who or what in the economy are going to be the winners and losers by slapping a tax (tariff) on them. They then turn around and use tax payer money to try and prop up (minimally) the sector they have devastated with their actions. (namely farmers)
What (continuously) does not get talked about is that all of the millionaires and billionaires that are in and out of the administration (backers) have inside information and are shorting said sectors they know are going to be devastated.
It is is going to take years upon years to follow all of the various money trails (as if that is even possible now with the President), and then it will most likely be the same as it ever was with little to no fines.
By the time that Democrats take power in eighteen months, the countries' cupboards will be completely bare. Then of course, republicans will block any and all attempts to replenish them while decrying ''Socialism'' when taxes will be need to be raised to so.
Round and round we go.
24
Here are a few things we know.
First, we know that Trump doesn't go into his hissie-fits to seek fairness for American consumers. His transactional style of "negotiation" is all about tearing up the pavement to lay down his own sidewalk as a Trump branding campaign. He destroys agreements made by previous presidents, to negotiate nearly identical agreements he can call his own. Trump is constantly seeking praise for his astonishingly fragile ego at our expense. He must burnish his brand while in the White House as a way of having brand momentum when he leaves.
We also know China is a unique enemy state, quite unlike that of Russia, an enemy state with little to sell the rest of the world besides oil and natural gas. China, on the other hand, though a communist autocracy, convinced American manufacturers that, throwing the American workforce under the bus for the sake of shareholder value, was an honorable tradeoff to move American manufacturing to China.
We also learned, the hard way, that China is a predatory business environment. They have shipped dangerous pet foods, pharmaceuticals laced with drywall dust, violated our patents and copyrights, shipped defective drywall to American homebuilders resulting massive lawsuits for shoddy construction, produced and shipped dangerous foods for infants. Buyer beware, right?
It has been a pact with the devil for the sake of cheaper goods. But, make no mistake. It was always about shareholder value, not consumer benefits.
23
@David Ohman As Krugman has pointed out, we don't live in a zero-sum world. Cooperation benefits both sides.
We can export lower value jobs in order to gain higher value jobs, and both sides win. For example, having cheap computers helps all industries that use computers, but hurts the workers here that used to make the computers. Most of us win; we should help and compensate the ones who are paying the price for our overall gain.
In the meanwhile we are trading with China, rather than bombing them and being bombed. Over the last twenty years, a billion people in China have been lifted out of grinding poverty. And here we can afford more and better stuff---a better foundation on which to build our lives and businesses. There are always problems, but in a win-win world we can fix them!
All this effort to fix our economy and make a more fair relationship with China seems to ignore the fact that we have expensive labor compared to China and many other countries and like flowing water our problems will find their way back.
1
From this side of the pond ,I join those concerned that POTUS embraces confrontation. Trade war with China ,the threat of military intervention in Venezuela and Iran and worsening relations with Russia. Early determination to cut back on American involvement overseas has evaporated as Hawks take pride of place at Trumps side.
Brexit will open the UK to trade deals with the USA. There is nothing in Trumps demeanour that suggests such deals will be to the good of the UK.
As a remainer,the EU has not earned praise in its response to the situation in Hungary or the financial crisis in Greece , Italy and elsewhere. It seems things can only get worse and DT offers little reassurance.
6
@Pat C
Trump is a human wrecking ball. But any "conflict" with Putin is just misdirection. The two talk and meet frequently, none of it on the record. They are playing us for fools.
I think we need to put a finer point on it Paul. What you are talking about is war. Not a Cold War, but a hot war, with all the destruction and misery that implies.
Both WW I and II stem from - among other things - economic or trade wars. Add in a foolish American President and a large portion of the American public who don’t seem to want to understand history, democracy or even simple facts and you have an explosive mixture that is driving us to real war.
Europe as Paul points out is no better positioned to step in and calm down the flames Trump is fanning.
If one looks to historical context, it is clear we are headed for multiple proxy wars, in the Middle East, Asia and Latin American.
But there’s more. Climate change and the mass migrations it is driving are fueling nationalism the likes of which we haven’t seen in many a year. These migrations will only intensify as the earth warms and tens of millions are forced to move to avoid starvation, flooding and the civil unrest that follows.
The signs are clear. We are on the brink of multiple proxy wars and broad civil unrest across many nations. What’s unclear is how nuclear weapons will factor in all of this.
Trade wars are the harbinger and the instigator of hot wars.
So Paul I agree with you, but you need to increase the intensity of your warning. Still I wonder if Trump’s supporters will get it before it’s too late. It may already be.
87
@Bobby
Sadly I concur with your sober assessment. I am concerned Trump will take us down like his casinos. And when there is nothing left he will still have his hate filled followers in tattered clothes waving the Confederate flag and wearing MAGA caps. 😔 sigh.
12
@Bobby
Climate change is not the only dynamic creating the mass migrations out of the Middle East. I believe, this situation is also the result of Putin's plan to create chaos in Europe by bombing Syrian rebels into lint — destroying housing, hospitals and schools — sending millions of Syrians and Iraqis into panic mode and thus, hitting the road for safer realms in Europe. And Europe — and Scandinavia — were not prepared to take in millions of refugees. Plus you have the likes of Steve Bannon touring Europe sewing seeds of nationalism and fear creating a tsunami of angst where it didn't exist before; the fear of terrorists coming in with the refugees, the fear of Muslim refugees demanding Sharia law, the fear of an arriving Muslim culture with a history of high birth rates adding to the fears of population growth.
It is all about creating fear and Trump — the gifted con artist he is — sees Putin as a kindred spirit in the quest for power and wealth.
2
If it is true that Donald doesn't understand anything -- and there is little argument -- then where is he getting his ideas on trade and traditional American alliances?
Is it possible that the same people who wink at Russian interference in the electoral process and have promoted reactionary political and militaristic policies are now fully in charge in Trump's White House?
Have we given the nation over to extremists on the far right who would dismantle the American Century for self-dealing political gain?
Do you recognize the Republican Party anymore?
20
Even a broken clock is right twice a day. And to some degree, Trump is right on China. But as Krugman's column lays bare, Trump is a one-trick pony when it comes to negotiating global trade, and what might (or probably not) work with China, won't exactly work with the EU, Canada, Japan, etc.
Here is where the Democrats need to switch off their "China autopilot" and develop a coherent policy with some teeth. For one thing, the US - and indeed much of the western world - made an error about 30 years ago with the simplistic syllogism: if we encourage enterprise with China, democracy will follow. That did not happen. If anything, China is offering a lesson to political theorists on the compatibility of capitalism and communism, or at least one version of these. America - and the West - lost sight of the moral justification that opened markets with China in the first place. And now we are dealing with the consequences.
I'm no fan of Trump, and in truth, I just don't think he has the negotiating skill or political pull to close a good trade deal with China - at least nothing that another President could have got, without squandering Americas reputation.
3
@Norman
China will always have at least one advantage over American- they don't have to spend any money fighting communism.
Are we talking about the same "peaceful international order" that drained and dismembered Jugoslavia in order to assure payments to foreign creditors? Or is it the "peaceful international order" that is currently bring prosperity to Greece?
International trade does not take place in some kind of free for all market place where small producers and consumers buy and sell. It is a large enterprise controlled by a relatively small number of firms that make markets and follow their own interests. Not surprisingly yhe results favor these firms and their owners.
3
@Chris Martin
Self-proclaimed economists claim to understand and lecture on the impact of current (and future) trade protection based on history- which is akin to navigating your car on a busy highway by looking (only) into the rear-view mirror. All countries (those engaged in exporting and importing goods as well as services) have some form of "trade protection" (sometimes as trade support, others as trade barriers, most have both- depending on goods and service). What else is new? Trade wars are as old as ancient tribes, city states, countries and empires. Or else what is a military or colony for- other than, in some cases, as a prison. But sometimes, in the past, those that built trade wars have found they have made prisoners of themselves instead of kings in castles. Then again, what do I know? Is it too early for a Scotch, or too late for all of us?
Even without Trump, Pax Americana was being under attacked and ripped apart by shortsighted and selfish American Congressmen/women, companies that could not compete domestically against foreign imports. Remember the quota on imported Japanese cars under Reagan, the legislated cap on imported Vietnamese cat fish to protect fish farmers in Alabama and other southern states under Obama, the duties on imported steel under Obama and Bush W, or the biggest action of them all when Nixon replaced the gold standard with the US dollars and thereby making the US dollars as the global reserve currency conferring on the US enormous advantages in global political, financial and economic power. These actions reflected the fact that multilateral institutions created by the US for its advantages will be challenged by the US when the advantages are perceived to have diminished or lost.
Let's mourn the passing of the Pax Americana for it was a short period of enlightenment due to the horror of war. Nations, especially on the European continent, starting with Brexit and the rise of nationalism are reversing to the mindset of pre-1914.
5
China has been an abuser of the world trade system. Our policies from 1990 on aided and abetted China’s actions and destroyed manufacturing in the US. China has stolen and continues to steal our intellectual property.
So it is right to stand up to China. But Trump is doing it in the wrong way, and we cannot turn back the clock. Manufacturing may return to the US, but it will be in the form of automated plants. Our consumer economy is based on the availability of cheap goods.
Will one of the Democratic candidates please come up with a real plan?
6
Yes, Trump and his cohorts in GOP are destroying American values, spiritual as well as material. The whole world is also getting insane. French Macron is up against German Merkel. British Brexit Tories are tearing UK apart. I am wondering how the whole world has suddenly gone insane.
Perhaps the blame is the relatively long peace we had since WWII in 1945. During this period, the world had some fights here and there, but we have been in a relatively peaceful period. During and right after each war, people tried to think of ways to keep the peace and the means to achieve that goal, such as the incomplete league of nation, after WWI and UN and Brenton Wood agreement after WW II that paved way to the present trade practice and calm in the world.
After almost 80 years of global peace, especially after the demise of the cold war, albeit imperfect peace, peace was erased from the people the memory, the memory of the terrible scourge of wars. People have become more selfish, are tearing each other out with global centrifugal force.
I don't know how this will end. It is a gloomy prospect.
8
To quote a classic now-deceased British comedian: "It's another fine mess you've got us into".
4
The solution is to get Trump out of office in 2020 and "restore" what remains of our basic decency and democracy in our country and this planet. We owe this to our ancestors and to our children and grandchildren. Help us get rid of the evil engulfing the world.
16
I used to dismiss political analyses based on personality politics. I assumed that in general in modern times, one individual's personality—for better or worse—would not have much total effect on a rationally structured society based on democratic values, laws, checks and balances, basic agreement over the rules of the game, and the entrenched habits and practices of long-standing bureaucratic institutions, especially in the relatively new western nation of the United States.
No longer, not with Donald J. Trump at the helm—a Commander-in-Chief and political leader who is more obsessed and determined than Captain Ahab in "Moby Dick"; more volatile, harsh, and punishing than Captain Blyth in "The Mutiny on the Bounty"; and more paranoid, capricious, and pathologically wired than Captain Queeg in "The Caine Mutiny."
I think Krugman's observation may be the most worrisome that "Trump imagines that he’s winning." Trump is delusional as in "out of contact with reality," with a bad track record in business, marriages, and life. But the more Trump loses, the more he twists the evidence to convince others and himself he is winning.
Trump is a seriously disturbed personality who does obvious damage wherever he goes. He should be nowhere near any kind of political power. He would not be except for the misplaced adulation of his base that he so craves and feeds his delusions, and worse, the enabling propping up and cheering of Trump by the Republican party that knows better.
10
@PB your very valid literary allusions all but wasted on a president who doesn't read and gets most or all of his information from 'Fox and Friends.'
We are so fortunate to have Paul Krugman. Bright, educated and on point. Thank you!
10
If you want to control a woman in a domestic violence sitation, you isolate her from her friends and family.
If a would-be dictator wants to further his control and autocracy over a country, he isolates the country from democratic allies and cozies up to dictators who will support him.
Trade issues with China notwithstanding, this is exactly what Trump is doing. So, Pax Americana must go. Many people think he is acting solely out of ignorance. Nothing could be further from the truth.
6
The key fact as I see is that China must be punished. We made a big mistake to let China into the WTO. Our goal now and the only way to curb China's bad habits is to isolate china.
I think high tarrifs in CHinese goods are the way to go. Also I would do something to prevent the admission of CHinese students to advanced degree programs. Also I would put stop to the Chinese habit of "birth tourism" = raid those houses and deport all the inhabitants. etc. We must confront and punish China on multiple fronts - not just trade alone
3
Trump has just stated plainly that his herky-jerky and uninformed tariff decisions—yes we are, no we’re not imposing tariffs on China—are based solely on how his decisions will affect his chances in the 2020 presidential elections, not on what is good for America.
No care for how these careless decisions affect American workers and farmers. Impose sanctions on soy and ruin farmers’ livelihood, then subsidize them with $12 billion of taxpayers’ money to replace lost sales. What kind of strategy is that?
I like the broad picture Paul Krugman paints of the Pax Americana, of which economics is only one spoke in the wheel. Everything this so-called President touches turns to dross, including the decades of American leadership built by our postwar presidential administrations. We must vote him out.
18
A very thoughtful article.
Does Dr. Krugman see any parallels between current U.S. trade policy toward China and the U.S. pipeline embargo against the Soviet Union during the Cold War? Is our policy toward the Chinese mainly an attempt to deny them foreign currency earnings that they can use to increase their military power? If this is the goal, will the tariffs do the job?
Ah, yes. The old argument that trade brings peace because then no one can afford to go to war.
I think that the disruptive effects of our spasmodic trade policy might be worse than your macroeconomic analysis suggests. There are supply chains, based on decades-long investment of capital and development of human capital, which will need to be re-assembled. There are supplier-customer relationships which must end, and new ones developed. Maybe this is good in the long run, but it is hard to manage in the short.
And what about the long run? Readjustment of trade policy with nations, as they transition from third to first world status, is necessary and should be done in a gradual, predictable way. But we are being whipsawed at the whim of President Trump. All we know is that any future capital investment, or developement of human capital, is at his mercy, and any agreement can turn on a dime.
The last blow to the US economy was when the Mitt Romneys of Wall Street made their quick buck liquidating much of the US manufacturing base and moving it to China. What remains has found its place in the larger world economy. Now that remnant is being turned upside down.
2
You are absolutely right about the limp reaction of the EU to the threat of right-national governments in Poland and Hungary. This is due to the fact that the EU system has not been built to deal with such a situation. But I have the feeling that the democratic institutions in the US are equally unable to deal with the phenomenon Trump. Everybody is watching the erosion of democracy in the US and there is little reaction to that !
11
@Max Reinshagen: One can see from the Bolsonaro regime in Brazil already that a turn to right wing politics is only a vote to institutionalize corruption.
3
The NYT needs to stop making arguments of the nature of pointing out how much tariffs cost consumers, because that argument is a junk argument.
Every time an influential outlet makes arguments of this nature, it implies that the overall end cost of goods to Americans should be the determining factor in economic policy. This argument has very large domestic implication that go beyond trade.
The arguments are weak. By continuing to make these arguments, you further divide the people over those who think greed is good and those who know it is not good, and that it serves no useful purpose in making economic policy.
Today a global trade policy that maximizes efficiency is a problem rather than a solution. It caused the housing collapse, world financial collapse, secular stagnation, and worst of all, domestic polical unrest.
We have to take on and tame this added complexity in a way that Keynes couldn't have dreampt of.
1
@DudeNumber42: What products cost consumers is the principle variable in the "efficient market theory" of economics, which postulates that resources are most optimally allocated when the full lifetime cost of products is reflected in their prices and/or costs of ownership.
2
@DudeNumber42
What should be the goal of international trade policy? What are we missing? You trash economic efficiency but provide no alternative.
Note that we already do use trade policy for other objectives, such as:
*sanctions to further political objectives and punish other bad behavior
*to promote free and open trade to engage the world in commerce and communications that we hope will reduce global tension and conflict
*including clauses about worker health and welfare and environmental issues
Also you are very wrong about Keynes - Keynes basic economic philosophy championed the concepts of complexity and probability (as opposed to assured knowledge), and addressed changing economic conditions, the need to adapt, and the too-often slow rate of adjustment.
Moreover Keynes was an extremely prescient thinker, thinking ahead and perceiving dangers ahead of others, his book "The Economic Consequences of the Peace" being a prime example.
1
Trump's view of global trade doesn't say much for his ivy league education. It verifies his failed business deals were based more on hype than substance. Funny how Trump is wrong on substance, but widely loved and Democrats are right on substance but widely hated. Love seems to be a matter of impression.
I can't imagine another 5 years and 8 months of Trump, but all of the insight and factual policy talk will never overcome the shiny lies of Republicans and wishful thinking of millions of voters.
7
@larkspur: It is more popular to be wrong than right, and instances of public acclaim for preventing something bad from happening are few and far between.
2
@Steve Bolger Ha! So true! When you prevent something bad from happening, everyone assumes that the problem was never there to begin with.
Can't help but to think trade (or the disruption of it) is just one of many avenues Trump is taking the the direction of Putin to seriously damage democracy around the world. If the US as the most recognized around the world can be fractured there is little hope for others.
Putin's puppet is more than he could have ever imagined, while Trump's supports defend his destruction as being a "different kind of president". Yes he is.
19
@Foxrepublican: US support for the Afghan opposition to the Soviet invasion ultimately dissolved the USSR. Putin wants revenge.
4
Fun that there are people still wed to the Russian collusion theory
That’s even better than clinging to the idea of zero sum trade wars
Trump can't understand anything not filtered through the lens of his self-interest. If regressive tariffs make his base happy with him, even as it hurts them and makes our nation weaker, he wants them. He is 100% consistent in his decisions to prop up his ego at all costs. I'm not sure he even knows there is anything in the world other than his ego, except for billions of losers.
45
@Larry Bennett
A classic con artist, as Trump certainly is, can smell the angst his mark has been experiencing. Where there is mere curiosity about what the con artist has to say, he plants fear were it previously did not exist. This is the audience at his rallies. They are the same crowds that used to wonder what the snake oil salesman had in his wagon. He could get someone who feels fine to question the state of their health suggesting their health is in danger unless they drink the snake oil medicine.
Trump's wagon is a podium with a mic. He creates fear where there was little of it. Now 30 percent of the nation's voters are afraid to take a breath without the oxygen Trump offers them. And he tells them he is the only source of that oxygen.
3
"He doesn’t know how tariffs work, or who pays them. He doesn’t understand what bilateral trade imbalances mean, or what causes them. He has a zero-sum view of trade that flies in the face of everything we’ve learned over the past two centuries. "
And astonishingly, he is impervious to learning. Certainly (I hope) Trump's advisers and family have tried to explain such things to him - about trade and other issues. But what others say means nothing to Trump.
His mind blocks out anything that does not agree with his perverted sense of reality. The only wall Trump has built is the one around brain that keeps out all facts and truth that don't agree with what he already believes.
Worse, he is also impervious to comprehending how stupid and misguided he is, providing no hope that he will change.
32
", or better yet if Trump were assembling an alliance of nations to confront objectionable Chinese policies."
Indeed we had the coalition in the form of the TPP, but Trump pulled out!
Indeed we had a nuke agreement with Iran, but Trump pulled out!
Indeed we had climate agreement but Trump pulled out!
'He has become Trump, destroyer of worlds!'
He could be gone tomorrow, yet the damage is incalculable at this time and will surly take decades to repair, if ever.
Yet the 91% of Republicans who support him sit smugly by as he destroys the nation, apparently because they think all the power will devolve to themselves, a'la the Karl Rove's project.
What they don't get is none of the power will devolve to them, and when we are destroyed, they are also destroyed.
42
Why would anyone who values the USA do the things that are being done?, asks one of my fellow commenters.
I trust everyone 30 or older has met someone whose particular psychology means they look out for number 1 in greedy, small-minded ways, who lie and cheat for personal gain while throwing other people under the bus, who have a talent for getting ahead at no small cost to the company they work for (or own)—indeed, at no small cost to people they love (or think they love, or would love, if they could love).
It can be very hard to see such people for what they are—bad news, sowers of strife and creepiness.
Some of us can’t conceive of a President wrecking the USA because his psychology compels him (or her) to.
Some of us are not aware of the very many times in human history when political leaders, seeking personal gain, have led their countries over the cliff.
It’s not especially uncommon.
11
@David: The US immune system against sociopaths and psychopaths is very weak.
@David: People like Trump are so resentful of inevitable death that they want whole nations and planets to die with them.
Trump’s trade wars are doing exactly what I hoped they would, hurt his amazingly ignorant and loyal base. These people are a drag on our society and hopefully their bankruptcy of the farm will illustrate to them what trump is, but probably not, they’ll blames the dems.
It is time to allocate federal funds to states on a percentage of what they’ve contributed, I don’t give money to a panhandler that calls me nasty names.
6
@Paulie: Public money flows from places where voting power is diluted to places where voting power is concentrated in the US.
2
Trump and his backers don't care about any of this. Not trade, or tariffs, not costs to American consumers, not U.S. hegemony or even world peace. All they care about is gaining and keeping power so they can get richer at our expense and feel like big shots. The trade disputes are simply political theater to please a bunch of dumb, small minded followers who live vicariously by seeing him bully everyone. He will continue to do it until we kick them all out. Next up, a war with Iran or perhaps Venezuela to boost his chances in the 2020 election.
13
@wyleecoyoteus
Please!!!!!!! NO MORE WARS!!!!
Are the republicans in office so corrupt that they would allow trump to start a war over nothing?
I fear that the answer is yes.
@wanderer Wouldn't be the first time. Remember Grenada?
What Mr. Krugman is describing is a return to a type of economic barbarism. The only way for me to win is for you to lose. If I have 10 dollars and you have 7 dollars, the only way for me to have more dollars is to take them away from you. So if I want 13 dollars, I will take 3 away from you, because I can get away with it.
This is how Trump looks at life, which has been well documented by his biographers. Everything is a zero sum game. There is no such thing as fair or equitable. There is only winning and he will win at your expense. This is precisely how wars get started.
Economic cooperation breeds peace. You don't want to shoot your partner if both are prospering together. Trump has no partners. He only has victims.
Instead of everyone giving a little so all can have enough, Trump wants to take it all and on his terms. This is the root motivation of barbarism.
So there you have it. Trump the Barbarian. Might make for a good movie.
166
You are absolutely right. The leader of the free world destroys all good will that has been built since WW II for short gain and the goal to win the next election ( if there is one).
20
@Bruce Rozenblit
Calling trump a barbarian is giving barbarians a bad name.
4
@Bruce Rozenblit
I'll go for the low hanging fruit:
Barbarians would be insulted by the association.
4
Trump is wittingly or unwittingly doing Russia's bidding to create economic, political and social chaos to weaken the West, not just the U.S. In so doing, he is committing treason and needs to be impeached immediately. The problem now lies in the Senate where GOP senators afraid of being primaried still support him. At the root of this support is right-wing media organized and financed by narrow interests in certain sectors of big business and inherited wealth. It could lead to world depression and World War III. Impeach Trump now.
7
The sad fact is China knows the economics involved even if Trump doesn't. Economic principals don't get lost in translation, the difference is Xi listens to his experts and Trump doesn't listen to anyone. As far as Pax Americana is concerned, I'm sure, of the two leaders, Trump is the only one who required a translation as well. But it works. Even in the comment section you can see the rise of the "Trumpettes'" anger toward all things China as he revs up the hate. Like Iraqis, or the French, or the Mexicans, or the EU, or the Muslims, or the Chinese today, Americans don't do subtlety, nuance or even direction when aiming our ire. We have become the sawed of shotgun of hate. Sort of a Pox Americana.
8
Well, Paul has given us the bigger picture. Trump sows chaos, deliberately.
5
@John Brews.
. . . Trump thrives on chaos. ✳️✳️✳️✳️
This is not about trade.
It’s about a madman’s fragile ego.
29
Exhaustion.
The American people are just exhausted by Trump's daily public spectacle of blatant corruption... his abuse of power, obstruction of justice, his illegal defiance of Congress and our Constitution.
Yet our Congressional GOP lets him get away with it.
We are sick, sick, sick of Trump's never-ending manufactured catastrophes... trade disasters, treaty calamities, immigration national emergencies, and bringing America to the brink of war with North Korea or Iran every time he feels heat about his tax returns.
Yet our Congressional GOP lets him get away with it.
We are so very weary of Trump's s lie after lie after lie to the American, we are repulsed by his words.
Yet our Congressional GOP lets him get away with.
When is America going to stand up to this spineless GOP Congress and demand they stop lickiing Donald Trump's boots and renew their oath to obey and protect the American people and the U.S. Constitution.
No one is above the law.
12
@JM
You forgot to mention crimes against humanity and casual indifference to cruelty.
2
@JM The solution is showing up at the polls and voting Trump and his GPO enablers out of office in 2020.
2
Ham-handed, mean-spirited, bumbling fool that he is: his most important ojective is to destroy American good-will on every front.
Winning as an obsession has produced one ofthe greatest losers the world will ever know.
And it isn't over yet. At what cost the repair?
6
Paul you can identify with this...
The First Law of Economists: For every economist, there exists an equal and opposite economist.
The Second Law of Economists: They're both wrong.
Think about it.
1
"...better yet if Trump were assembling an alliance of nations to confront objectionable Chinese policies." BINGO!
The self-proclaimed, and much lacking in proof bigly deal-maker, is also not the worlds best coalition builder.
I recently listened to an interview with Trumps second ghost writer, about how during the years of his bigliest losses, he was mostly looking at fabric swatches, then he was dealing with the very details as to why he was losing money like water thru the Hoover dam sluices. His version of Nero's fiddling.
Its a grand metaphor for how Trump approaches trade negotiations. And more about him as NOT being a true leader, but instead someone prone to belligerence and childishness and wasting precious time.
Imagine (which I often do, despite multi-decades of dislike of DT) if he was making even a 25% effort to prove his naysayers wrong. Imagine, if he had decided to forget how "the elites" snubbed him, and instead went to the EU and said, "Hey guys and ladies, we need to join together and rework this trade thing with China. You in? Together we can work for a better future for us all."
Imagine, IF Trump aimed for real solutions instead of the low-fruit of garnering applause from his zealot fans? Imagine real efforts.
Which is truly at the heart of his approach to China. Keeping them in enemy status for his campaign ranting. Same with immigrants. Stop needed aid to Honduras, so more of their people flee to our borders, thereby creating the "horde."
8
What you’re talking about is leadership.
We haven’t had good, strong and democratic leadership in the US since LBJ, really, with all his problems.
We’ve alternated between rational administrators as Presidents (Carter, Bush 1, Obama) and charismatic wannabe dictators (Nixon, Reagan, Clinton, and President X, the current one).
Meanwhile, the EU has increasingly, across the political spectrum, from Tsipras to May, taken a “let’s just kick the can down the road and hope people stop looking” approach to leadership.
Which is worse than no leadership at all.
We really need a new generation of leadership, not craven to the dying patriarchy of old white men, not fraught with self-seeking ambition, with real vision and charisma _and_ an articulate commitment to democracy and, you know, reality.
That would be Kamala Harris, in my book.
Yes, we need her, and allies with her ways of thinking and doing across the world.
Meanwhile, China has been the one growing a global Pax Asiatica. It’s been the country rapidly extending influence through trade, with economic alliances. It is to be celebrated for taking up this mantle, even with its various flaws (were we ever perfect? Absolutely not).
With Russia, by contrast, having been so cornered by American manipulation for so long, well, we see what the results are there. War, annexation, nationalism, authoritarianism.
We should be pursuing peace through global trade. Our “worst enemies” should be where we start. THAT would be wisdom.
4
Paul Krugman writes as if Donald Trump would understand it. The President of the United States has not a clue about the historical interconnectedness of trade and peace or war and tariffs. We have an exceptionally stupid and ignorant man at the helm - I don't believe for even a minute that Trump's actions are planned, considered, visionary (ahem) or that they advance the nation he was elected to lead. The expression 'a pig in a poke' best describes his decision making. Humiliating a quarry, as is his wont, is the mark of a thug and a bully...and although China is not without fault, Trump's approach to problem solving creates far larger issues for the USA down the line. His cavalier approach to decision making is so dangerous on so many fronts. Unless he is stopped now - the chaos he has created will only grow exponentially - because he lacks the knowledge, understanding and ability to undo the damage.
4
@Tom
Once the damage really starts rolling it will be like an unstoppable mega hurricane that lasts for years maybe even decades, but will eventually end when every living thing is dead.
1
So basically Trump has turned Pax Americana into Tax Americana. I want to have a closer look at that diploma from the Wharton School.
3
Trump is like the guy with one of those rubber band driven wind up balsa wood planes, who thinks he knows how to fly a 747. Fasten your seat belts and assume the crash position folks... it's gonna be a rough landing.
4
The sad fact is that the U.S. and sixteen other countries (most of them emerging economies in Southeast Asia such as Vietnam) had set up a mechanism for confronting China through the TPP. Because it had former President Barack Obama's name on it, Trump tore it up (same as the Paris Accord and the Iran deal). As a result, China has a more or less free hand in the Southeast Asian emerging markets. Don't discount the whispering in gullible Trump's ear by Putin and Xi Jinping. And Kudlow is a sycophant as are, I suppose, others around Trump. These voices are unable to challenge the wisdom Trump gets from his buddy (and future benevolent of Trump Tower Moscow), Vladimir Putin. If the EU is unable respond effectively to Orban in Hungary, how can we expect to respond effectively to Trump (and by default, Putin) right there in our White House?
6
Agree with Mr Krugman's conclusion that something much bigger than inconvenience is coming up.
Americans are and have been voting to get smaller because too many perceive the globalized world as the outcome from a generation of failed neo-liberalism and structural wealth concentration.
A recent analytical article demonstrated the near-certainty that the Republicans will maintain control of the Senate in 2020. That means a pernicious sort of reactionary hard-right conservatism is structurally embedded in our political economy for as far as the eye can see.
4
If we don’t protect the Constitutional Laws that protect our democracy and impeach President Trump (no matter what the consequences of the endeavor), what ground do we stand on to criticize him for breaking them? Let’s stop the questions of should we or shouldn’t we - we have to protect the constitution or be responsible for its destruction. We already know that things will only get worse. Democrats first must become united, but especially because disunity poses the greatest obstacle to victory. No matter what party, congress has the mission to protect the very thing our country’s existence depends on and so each elected person, whether a democrat or a republican, in the house or the senate, should stand up to fulfill it now.
5
Often times, liberals have good intentions but don't always have good implementation skills.
Conservatives have some valid criticisms as a result.
But conservatives aren't really interested in fixing the problem.
They just use the valid criticisms to tear down what liberals are trying to do.
Then conservatives enact much worse ideas that only help the rich.
18
Mr. Krugman is finally embracing why confronting China might be a useful thing.
However, his last couple of paragraphs clearly enunciate something that is central to how the liberal class views American domination of the economic landscape in the world. They like it and wouldn't mind sharing it with the EU. However, they are unhappy about any expansion beyond those two. In a way, both the right the left are just deeply race and ethnicity conscious. The right is just open about it.
@SR: Liberals believe that true equality results in more opportunity, better use of our intellectual capital (i.e., all of our citizens), and improvement in the lives of all Americans. They believe that this can extend beyond borders as well, contrary to your suggestion that they don't care to share with the non-whites of the world.
Conservatives, on the other hand, believe that the economy is a fixed size and for anyone to get ahead, someone else has to suffer. I agree that they are "open about it."
From ordinary conservatives to Donald Trump is yet another step down the path of simplistic selfishness. Donald Trump style conservative economics has only one beneficiary: Donald Trump. People who practice this kind of economic behavior don't have anyone else's welfare in mind; in a leader, this sort of selfish outlook is a disaster.
2
Mr. Krugman, we need your thoughts about the current low unemployment, increasing wages, and job creation — which have Trump supporters howling "I told you so!" and will be the heart of his reelection campaign.
2
@Erik Dolson gratis of great foundational planning and implementation by Obama. You're welcome.
@Erik Dolson All of which was due to President Obama rescuing the economy from republican nincompoopery.
@Erik Dolson: Tell it to the farmers.
The Trump's trade war against china is more than trade. I get that. It is just one part of a total WAR on China since the US recognizes China is actually the most formidable competitor and hence, enemy, soon after the Korean's war. Trade war is the first step to wear out the Chinese, its goal is to create economic chaos,bankrupt the nation's financial institutions; civil unrest soon erupts, then actual military actions commence in the name of keeping the peace of the world.
A nice piece from Dr. Krugman. Enjoy the hiking!
A couple things:
First, this is the first time I've ever heard someone on the left discuss Pas Americana is a positive light. Strange days.
Second, the EU does not have a particularly strong hand to play with Orban. Brexit has already shaken the system. Russia is plotting. The EU must avoid overplaying its hand and tipping things over further in Eastern Europe, either pushing them into Russian orbit or convincing more of their citizens that there is a deep chasm between their values and history and Western Europe's.
4
@tew The strange thing is that nobody in the liberal press seems to realise that in Hungarian terms Orban is actually a moderate. An opportunist, but still a moderate.
During the last election campaign in Hungary there were posters all over the place showing Orban as a puppet on strings controlled by Merkel and Soros: Germany, and Jewish big money.
Jobbik is both much more nationalistic than Orban seems to be, and more anti-Semitic too.
Most Hungarians are anti-Islam. The country was occupied by Ottoman Turks for 300 years (longer than the US has existed) who practised a policy of leaving not a stone standing on a stone, nor any people. Much of the country still seems empty.
As has been pointed out often, our current president sees the world as an elementary school playground. He is the bully in control. If his position is threatened, he fights back with any weapon he can lay his hands on. It's not a matter of right or wrong or what is logical or good for the future; it's all about power at the moment and staying in power. This explains his response to the Mueller investigation, to the Democrats in Congress and to foreign countries that challenge him. And it explains why he admires dictators.
14
Trump doesn't understand tariffs, but reading this post makes one wonder whether Krugman does. True free trade would flatten wages worldwide, ultimately a noble objective but not something that workers in developed countries want to happen now at their expense and for increased profits of capitalists. If wages in the US are not to be reduced in this way, there has to be some form of protection and ideally tariffs do this. Krugman has a habit of ignoring the wage implications of international trade when it is a matter of supporting hypothetical "free trade". The things he talks about, such as effects on exchange rate, are generally subordinate to the effects on wages - at least to workers.
Anything that increases wages is likely to increase prices overall, which you can regard as a "tax" if you want. Raising the minimum wage would certainly raise prices of things which are mainly domestic. Employers would just pass on the increased costs to prices, since they would all be affected. Would that be a reason for rejecting an increase in minimum wage? The claim that increased prices affect mainly workers is false. If your job has been outsourced, the lower prices of imported goods do not benefit you.
Trump is probably not competent or even inclined to devise policies which would benefit workers, but the attitude taken by the media and many economists in characterizing any price increases as a harmful "tax" is profoundly anti-labor.
2
@skeptonomist: The assumption that increases in costs are automatically passed to buyers is not cast in stone. They can also be subtracted from profits. Of course the people who own the profit want you to continue to believe that their share of the pie is not part of the equation. And equally important, when profits shrink to near zero, then any excess costs must be passed on or the business fails.
2
@skeptonomist
Yet with all the efficiencies and higher levels of production, prices of many products, many of them staples - have not decreased to where they should have...
Why is a gallon of milk as, or more expensive then a gallon of gas? Why is a loaf of bread $4-6...while most of the loaves are smaller then ever!? We export tons of wheat, and the bread in those foreign markets is cheaper then ours?!?! (much like Rx drugs!)
A real and meaningful rise in US hourly wages doesn't have to result in a considerable rise in prices. But it does work that way always, because of the ridiculous wages of the Executives at the top. Wage increases for the hourly workers is deemed a threat to the salaries of the Executives, who are beholden to the stock holders and their dividends.
A huge contributor to the stagnation of hourly wages is directly linked to the obeisance of US businesses to Wall Streets needs. You want a more valuable stock-price, pay your employees less, except your Executives.
4
The long-term benefits of international trade are truly the most important issue of the current trade war. Dr Krugman is correct that 80 years of growing trade agreements have been good for international peace and for America. A world in which growing trade means less wealth imbalance among nations secures us all. Ideally, we should want the poorest nation on earth to be only marginally poorer than the richest. But he stops short of a further necessary point, one that has grown progressively worse with each passing year. If the wealth of those equally-wealthy nations is concentrated in the hands of fewer and fewer individuals, the vast majorities of the peoples in their respective countries will see no benefit to this international trade. We are now seeing the results of this wealth imbalance, in the growing migrations of peoples and countervailing appeals of nationalism. What was devised as a way to ease international tensions has been corrupted by the malign acts of greed, and we are no better off than before. Throw in ignorant leaders like Trump who diminish free trade further, worsening climate change that fuels more instability, and we have a recipe for global conflict like we have never seen before.
9
@Ockham9: Apparently the "malign acts of greed" you mention corrupt everything. That's why we're in the state we're in. Fix that and the rest is just a technical management problem.
Now that the worst historical events of the 20th century have nearly passed from living memory, we may be doomed to relive them in the 21st century. The timing is not a coincidence.
5
Going after China for intellectual property rights after we've already handed them so much tech seems to be absurd too.
In the 90s I knew a guy who's father had invented an important device but the himself had done things that were mostly developing lifestyle things for himself and others who were really wealthy like building way out in the country.
Anyway, he didn't want to pay taxes for education since his kids (3rd failing marriage and kids from each) got private educations.
He also off-shored whatever was left of his father's electronic empire which still had valuable patents.
What really annoyed me about this guy was his tendency to use the system in unethical ways. Whenever he needed cash his expensive vehicle with brand new tools would disappear, only to be recovered sans the expensive tools.
Trump's taxes on China's goods are going to hit the poor heavily while the rest have to bear with it so the well off could care less. And just like that guy who put his kids thru school getting a tax bear at the same time, Trump has targeted the middle class and poor who have let themselves get divided over issues like race and immigration, Trump keeps destroying the rest of the infrastructure like public schools, libraries, and health care.
China, meanwhile, is well on its way to becoming the leading economy of the world and when they do, they will remember Trump's actions foremost and not the fact that the US and other western democracies handed them the tools.
7
Keep wages constant and a tariff will curtail economics of the massive group of buyers which is everyone.
Will make government bigger reducing production of necessary goods . That is the road to induced socialism.
The underlying problem is that we’re reaching the limits to growth imposed by the physical laws of the universe. Matter/energy cannot be created or destroyed, only its form can be changed. Here on Earth, this means there’s a fixed amount of everything, of which only a portion is available for use.
As the population swells far beyond the Earth’s sustainable carrying capacity, resources become scarce. People then seek to hoard needed resources for themselves. This is why we’re seeing authoritarian governments on the rise worldwide- they’re all promising to stop Those Others from consuming Our resources. Only the definitions of “Our” and “Those Others” change from one community to the next.
It’s probably too late to stop the population explosion other than through the Four Horsemen - from the looks of things, war, famine, and drought are coming to visit very soon.
14
The issue is we are not innovating fast enough for the population growth.
Technology allows us to better utilize the finite resources in a sustainable way. Like how people only use a fraction of their brain capacity, we are only using a fraction of the potential energy from resources.
Better crop yields, more efficient transport, energy efficiency, pollution control/elimination.
America lacks innovation. And a web application or debt bond trade is NOT innovation.
6
@John M
People have been saying what you're saying for 200 years or more. Really more, because we've heard apocalyptic prophesy since the dawn of religion.
.
No, the physical laws of the universe do not set a limit on our population.
.
No, the population isn't exploding. The rate of increase in the population has been decreasing every year since the mid 1980s. We're headed for a plateau, and then quite likely a decline, later this century.
.
We will easily feed ourselves. The question is how to do it without excessive global warming, and while leaving enough space for the rest of the species on planet Earth. Those are difficult problems, but not apocalyptic.
I think if we are going to look at the big picture here, the collapse in the international order reflects the fact that our global economic system is reaching its natural limits. Yes, the twin pillars of technology and mass production upon which our modern economic system rests have created vast wealth and, for much of the world, unprecedented standards of living. But we are also seeing a world where the dependence on income for survival is creating great financial insecurity, particularly as jobs become ever less secure, as wealth inequities grow, and as communities disintegrate because of the constant displacement of jobs and people. On top of that, we are facing a looming environmental catastrophe that could destroy the ecosystem on which our unsustainably large population relies for life. I don't think most people see clearly the coming apocalypse—but I think most feel something is terribly wrong:
"The best lack all conviction, while the worst
Are full of passionate intensity."
70
@617to416
Well stated. I see the beginnings of grappling with the issues happening in France. The Yellow Vest movement arose when Macron gave a one-two punch to "the masses" -first, he gave a tax cut to the rich, then stuck everyone with a "planet saving" gas tax. This hypocrisy (and the impending financial pain to the non-elites) was the last straw. Fast forward - members of the Yellow Vest movement are now discussing, with the Macron government, how to 1. Make a more equitable financial world for all in France and 2. How to mitigate the effects of climate change without the costs falling disproportionately on the have-nots.
8
@617to416 Yes. We are in a transformational period where a fundamental issue is going to be incomes vs. jobs. Consider the world in 2100, or 2119. If the demographers are right, world population may level off at around 10B or 11B. Technology no doubt will have continued (hopefully mostly for the good) to drive "productivity." World GDP growth will significantly outpace population growth, and productivity defined broadly as value of products/services divided by the number of people will also rapidly rise (and in real terms, discounting for inflation). The number of actual "workers" as we now define work (paying jobs) will also decline sharply, meaning that strictly defined "labor productivity" will become a fairly meaningless construct. So, how will the value of the products/services get to the population, if not via wages (and/or "non-earned" dividend income for those holding stock shares, bonds, etc.)? Who knows how it will occur, but there will obviously emerge new forms of "social compact" (or social contract) policy that will reasonably and effectively distribute the income. "Redistribution" is a term that won't be used, replaced by new terms that explicitly recognize the realities of the new world economy. The future situation is easy to lay out. How we get from here to there, in fits and starts, hopefully no terrible wars thrown in, will be the history of the rest of the 21st century.
4
Paul, agree completely.
If China is cheating in a way that is economically injurious to all, then we need to confront it collectively - as a massive alliance of advanced democratic Atlantic and Pacific powers (the de facto constituents of the current Pax Americana).
The TPP was a preliminary attempt to do this - but suffered from the fatal flaw of excluding one key constituent in our American alliance, the constituent of organized labor, who were neither consulted on the advisability of such a treaty nor directly represented in the talks themselves (except, as noted by Elizabeth Warren in her most recent book, through a former Investment Banker appointed as lead negotiator by President Obama).
However, the notion of an ongoing global democratic trading system, the natural successor to the existing Pax Americana, is a sound one - and one which all nations seeking to oppose an imposition of authoritarian economic hegemony should embrace.
This new trading system could and should put worker rights and environmental protection (in an era of catastrophic climate change) at the very top of its agenda - for these are concerns that effect the vast majority of citizens in advanced industrial nations equally.
As a rank narcissist, Trump could never be expected to think in this fashion - and predictably, he hasn't.
But we can begin to think in this fashion The Pax Americana did good - but it was only a beginning.
11
In 2020 we will have a decision to continue suffering malignant sickness the election of Donald Trump has inflicted on us, or to remove the tumor before it kills the patient. It's time for Trump's supporters to put their fear and hate on the back burner and vote for what is best for themselves and this country they claim to love before it's too late for all of us.
54
@CV Danes,
For many people, if not most, fear and hate empower, validate and energize. And override economic interests (particularly if those interests are longer term or if recognizing them requires information or abstract non-"gut reaction" thinking). This is why the emphasis on racial and cultural fears (and a binary zero-sum view of the world in general) by Trump and much of the Republican party works as well as it does.
10
Good luck with that!
I do not trust Paul Krugman’s predictions when it comes to Trump. His hatred towards Trump has continually led him to predict calamity when Trump is involved. Instead we have the opposite. Trump understands world trade far more than Krugman could ever admit and his Krugman’s blind hatred is leading him astray.
5
@s K
Obviously,you don't get it. Trump is an (long term) disaster for the US and the world. When the country and the world needs a true leader, we get an aspiring dictator and buffoon. Unless he is removed from the office in 2020 (if not sooner), the ending will be worse than what we have experience so far.
5
Baffling. Baffling that citizens like this can still not see the absolute simpleton corruption going on.
6
@s K
This is simply an assertion without a shred of evidence. "Trump understands world trade far more than Krugman could ever admit..."
Show how this is true.
4
As long as this president uses tariffs, and especially tariffs against China as a means of punishment without caring or realizing just who is being penalized, he will continue to wield it as some kind of mighty sword.
Blind and deaf to advice against taking this route, one that he has championed for ages thinking it will make him appear stronger, he has no idea that it's not only the U.S. and what few allies she has left who are bearing the brunt of his decision -- but his very support base in the heart of rural America.
In the end, the cost of this trade war of his will outpace the effect it was supposed to be having.
8
Follow the money.
Insider trading... from the outside.
Insider trading is playing the stock market when you have "inside information" that the regular trader doesn't have. It is illegal.
In this case I suggest that Trump (and his cronies) know pretty well that when he yells "MORE TARIFFS!," stocks will dip pretty significantly, and that when he backs off on the whole trade war thing the stock market starts climbing again.
Not hard to time one's buys and sells if you are on the inside of the tariff decisions. Deliberate manipulation of the stock market by leading a trade war.
Insider trading, from the outside.
108
Is Trump and his cabinet allowed to own stocks?
We need a major house cleaning in the US. I can’t believe that one man can do whatever he wants and get away with it. Trade, diplomacy, environment, obstruction, putting kids in cages, politicizing the military, violating law, and general corruption. We make some banana republics look good.
433
When do we get off of our iPads and take to the streets? We need to stop waxing eloquent. We the people need to DO something- NOW.
30
@BR
USA has become a banana republic under Trump and the Republican Senate.
Voting out all Republicans is our only salvation.
76
@Betsy Groth APRN
General strike.
3
The USA has always led in these matters, and the world followed. Since Trump has no policy other than egotistical war against all, and his mental capacity is extremely low, his leadership below zero, and all-things-Trump have tried to relegate the US from its global leadership position of times past to a new low based on "go it alone"--- once he leaves the WH the USA will resume its leadership for all the world to again follow. As for rebuilding the GOP, it may be too late because it has enabled Trump to play in his sandbox and tweet his toddler tantrums with zero rebuttal.
8
@Robert
I disagree with "once (Trump) leaves the WH the USA will resume its leadership for all the world to follow." Trump's departure should stop more damage from being done, but is very optimistic to assume the US will have willing partners to help in restoring Pax Americana.
Going "back to normal" in either 2021 or 2025 will be difficult because trade and foreign affairs have become polarized and partisan. Who is going to trust the US when Democrats and Republicans disagree, and every deal is subject to cancellation in the next administration? Trade and treaties did not fit well with 4 year election cycles.
5
@Robert
I keep hoping the GOP of old will rebound to be the "loyal opposition" after Trump's departure. Alas, before Trump, there was the Tea Party; before the Tea Party, there was Gingrich describing all who saw through him as traitors and unpatriotic. Trump has the so-called Freedom Caucus led by the loudest of gas bags, Jim Jordan, John Kennedy, and Mark Meadows, to shout to the rooftops on his behalf.
Like the Tea Party types, the Freedom Caucus blowhards have exposed themselves as the kids who ditched class while critical thinking skills were being taught. Like Trump, the love the fight.
1
Isn't there anybody out there that gets it? At the time, outsourcing gave America what it wanted, cheap consumer goods. It was a win win. Previous Presidents knew this and in fact the Republicans were prime supporters. It was called globalization. What was forgotten is that the void was supposed to be filled by America taking the lead in the development of technologies of the future. Instead we rejected the R&D and the education needed and called the challenges of the future a hoax, lamenting the loss of manufacturing jobs, thinking that bringing back outdated industrialization would solve everything, as purported by Trump. What is happening, is that now China is outsourcing those same technologies we got rid of while taking on the challenges of the future. Guess who are the real winners and real losers?
118
@DSS - Large numbers of states and even larger populations of Americans have simply failed to invest in themselves and their future through obtaining the advanced training and education required to lead in the development of technologies of the future.
Its a whole lot less effort to put in your 40-hour work week at the local plant or mill and then go home to watch reality TV than it is to work that job and then take night classes at the local college and learn a new skill.
Comparative advantage is the basis of global trade - why would the owners of any manufacturing firm employ US workers at $20-$35/hour plus benefits when they can get the exact same skill level in workers in Mexico for $3-$4/hour?
6
@DSS
This is so true in California and a few other states. We pioneer silicon revolution, green energy, culture and entertainment, biotechnology, space exploration, science and technology. Trump, Republican Party and their base are going back to fossil fuels, old manufacturing, rural industries, low-wage services jobs.
Americans will suffer for their indifference and support of the evil and idiotic Trump for their partisan "win".
3
@GTM Nonsense. When the tech revolution started, I knew alot of people that spent a fortune to get a degree in computer programming and engineering. The jobs required very long hours and low pay. It wasn't long before the computer geeks would start looking for better wages elsewhere until none other than Steve Jobs got all the other tech companies to ban together to create non compete agreements. Then came the HB-1 visa and the import of most programmers and engineers, workers that would work for low pay , long hours and threats about not having their visas renewed if they complained. THATS why Americans didn't stay with tech jobs!
2
The shift to the right in parts of Europe is not mere happen-stance: it is the result of excessive immigration of low-skilled workers in to those parts. Immigration is not a yes/no question as some like to phrase it: the benefits of controlled immigration are clear. The USA and EU alike welcome skilled workers such as medical professionals, and that will continue to be the case. The NHS in the UK employs many doctors and nurses from other countries, and I don't hear even the most hard-line Brexiteer complaining about that. Those immigrants don't need to sneak over borders at night: they can go through normal immigration channels.
As long as illegal immigration is a problem in e.g. Hungary, I don't expect the trend to reverse any time soon. When I see newspapers such as NY Times or The Guardian failing to make the distinction between welcome and unwelcome immigration, it devalues what they say on the topic
3
To many Americans think it’s the 19th or 20th century or believe those were the goof old days.
Today, perhaps too many are indifferent or forget what World Wars were like for 10s of millions.
Maybe we with our daily gun death counts and endless regional wars we have become comfortable with aggression, violence, and domination. Our culture exudes these characteristics; maybe that’s why a large portion supports the authoritarian President and political party that has instilled fear and hate at every political opportunity.
Why do so many Americans dislike the United Nations? Too many believe we must be number one always. We may have built great alliances but we’ve gone to war to protect our economy too, regardless of international law.
5
What happens when a spoiled child thinks that fighting and dominance are pleasurable? When peace and good relations are painfully boring?
Like a drug addict, they become willing to pay in real money for their pleasure and relief, and discount costs to the point of fantasy or hallucination.
I was trained as an economist, and found it difficult to convince my colleagues that there are situations when irrationalities swamp the rationalities, and therefore are important to study methodically and in conjunction with traditional economic factors, in order to explain real economic phenomena.
The rise of Zombienomics in our current era is, in my opinion, one such phenomena, that Krugman comes closest to explaining, because he is willing to step outside the box. Other economists such as Samuelson, stay tightly within the box, and therefore, while providing some insight, lose their usefulness when zombie factors overwhelm predicted rational behaviors.
12
A common sense voice (from a nobelist), even over a coffee and croissant. But Trump knows that how things look (at least to his undereducated base) is what counts - that he is a tough negotiator. He knows who he is helping or hurting. He just doesn't let facts interfere with his facade.
11
Paul, you continue to operate as though the world were somehow represented by the principles of free trade and market clearing when it is anything but. In your world, trade results in specialization that enhances aggregate welfare and floating exchange rates prevent persistent current account imbalances. Guess what. No. Our world is dominated by currency manipulators, and intellectual property theft. The system has resulted in the evisceration of the American middle class, enriched the top 1% and has allowed an illiberal regime in China to challenge American hegemony. That's where your theory has gotten us.
Dangerous? The greatest danger would be to let things continue to develop the way they have since the 90's. Trump is a hot mess. But he is the natural outcome of where the neoliberals have brought us.
12
@Rich888
You are wrong.
You are thinking a stagnant world economy.
The human history tells us whoever leads the advanced technology will be most prosperous.
It is no use lamenting the loss of old manufacturing jobs.
Who becomes most rich?
Silicon Valley and finance industry.
Who will be more rich?
Biotechnology, green industry, sharing and communication industries, nano and robotic industries.
Advanced countries look forward, invest in their infrastructure and citizens, harmonize and equalize their society.
America has gone backwards under Trump and Republican Party.
3
"But where the Europeans are weak, Trump is malign. He’s working actively to make the world a more dangerous, less democratic place, with trade war just one manifestation of that drive. "
Yes, and yes!
6
If only there had been some clues in Mr Trump's past that could have warned us in advance.
When the economy crashes Trump will say "We needed more tax cuts, We needed more tariffs. Obama did this."
12
"If only there had been some clues in Mr Trump's past that could have warned us in advance." I trust this is a sarcastic statement.
5
Oh dear, when you write in one continuous string and without much editing you are at your best. This is one clarifying piece.
However I do see a caveat. Trump smells the power of China, much like everybody else does, and tries to look as the one pushing back. It pays politically, and the US can be a big bully in the hands of a bully. Obama used the TPP to contain China and set up a rules-based framework, but that proved to be vulnerable and way too soft. The Pax Americana was already strained by the Pax Americana, for it has no mechanism to deal with a big power willing to break the rules. And China used the Pax America to get back to 1400s ambitions of hegemony, and a relatively peaceful adn militarily feeble Europe leaves a tired and many time torpid US alone. The only possible outcome was a gradual progression of China's power, unless of course it collapses inwards due to a political crisis say because an astute Chinese caudillo emerges from the military regime. But it is not happening and might not even be desirable, the control is complete. So the US, Pax America or not, would have had to confront China.
Trump's clumsiness may just accelerate matters.
4
@Ard China is believe it or not, a fragile superpower. The engines of it’s expansion are
already sputtering; it cannot maintain it’s torrid GDP expansion. Ecological disasters, political revolt and increasing levels of corruption are just under the surface.
2
@Ard
The TPP was anything but soft. The mistake was not selling its greatest benefit: economic security against China. Obama failed to communicate why TPP was critical; the Dems in 2016 were wrong to jettison the best agreement we had devised.
What got us here is the go it alone, win at all costs mentality of an administration that is as clueless as it is morally bankrupt.
2
Krugman is correct to be concerned with the long term consequences. With the benefit of hindsight we can look back and spot examples where frictions over things such as trade were not instantly a trigger for cataclysmic events but were certainly the seeds of very large international conflicts. We’ve looked back and asked how could they have been so blind to what was bound to happen once allowing the breakdown in communications and efforts to compromise? It’s like a chain of events, once they’re set in motion, develop a life of their own. The more time that passes, the more difficult it becomes to stop what becomes inevitable. Almost always the personalities of the actors seem to exert an excessive influence over the lives of many millions of people.
2
On a planet with finite matter and energy, economic activity is always a zero sum game (at large scale). Even if all human actors end up winning from a trade, the Planet is losing due to economic externalities, which means that the costs are really pushed onto the environment. There's no free lunch, folks!
29
Maybe you have not yet heard, but Mr. Orban is slated to soon be at the WH. Additionally the USA ambassador is quoted as saying that Mr. Trump greatly admires Orban’s version of ‘autocratic’ democracy.
I am sure that Trump will, for once with his feeble mind, trying hard to understand how Hungary’s ‘soft’ dictator did it.
30
Perhaps we're starting to see why he was never able to close his Trump Moscow deal...
15
Trump does not seem to understand that bilateral trade deficits can be caused by factors no government can control, such as savings rates, income levels, exchange rates of currencies, and population differences between countries. And: American dollars are a reserve currency, so good luck. The “problem” he sees is a false narrative: that bilateral trade deficits cause America to lose money. Trade deficits are not a scorecard anywhere except in Trump’s mind. But he has convinced voters that he is correct, and I think that is all that matters to him. It makes for a good story at rallies and the truth be damned. His supporters believe he is fighting for them; yet he pulled out of the TPP without understanding it; and his policies lately are counterproductive even for this largely infirm and unproductive administration.
14
Give me a break. Russia got a toe-hold in Cuba and then set about expanding its base to Bolivia, Nicaragua, Ecuador, and Venezuela. Russia would be happy to keep going if it could and take over Brasil, Argentina, and many . In mot cases, the US is supporting the people against autocratic governments.
3
@Amy
You clearly do not understand history. Communism got a toehold in the Americas because of unconditional US support of dictatorial regimes in return for safety for American corporations who were making money and paying bribes.
Bottom line is that people don't like being oppressed. When they're dying, they'll take help from anyone. It played right into Communist hands.
1
Au contraire, I think Trump knows exactly who is paying for the tariffs. He deliberately misstates ( media term) or rather lies (my term) about the tariffs to fool those who are not economic policy wonks and to keep the masses from getting upset over rising prices.
The tariffs are back door subsidies for industries and key demographics (think steel tariffs helping a few folks in PA and OH) that Trump needs for re-election. He is propping up key industries while giving Americans a bogeyman who they can blame should the economy turn south or if he can't deliver on 4+% growth in GDP.
As long as he can continue to frame the tariffs as a hammer that is hurting the industry/manufacturing job stealing Chinese, he will continue to receive support from the rust belt.....
And he is doing a great job....even though he is lying through his teeth
9
I look to this Trade war as another force to reorganize the global supply chain - the logistic networks of complex products are getting accelerated changes due to Trade war. China is not a honest trade partner and a democracy and expecting Western trade behavior from China was a dream. Finally, Trump brought our elites get out of that dream. World will not fall apart because of this Trade war as market figured it out - the supply chain will reorganize fast and gradually a new equilibrium will be reached. There may be some lose of Chinese business, but China will smartly organize its economy to maximize the benefit without changing its political system. Let us allow this transition to happen - let majority of goods to US comes from Vietnam, Malaysia, Bangladesh, India, Thailand and other South Asian countries whose combined GDP is now close to $ 6 T and they will run major trade imbalance with China.
@Kalyan Basu
Yeh, sort of like the Trans Pacific Partnership.
7
@Kalyan Basu
So Trump's goal is really to Make Vietnam Great Again.
I guess one could argue that the US does owe it to Vietnam.
4
The question is, as always, why. Why would anyone who values the USA do the things that are being done? We know he isn't really that clever and we know he has regular Pooty calls, and Mitch McConnell have no objections. Why?
340
@Don
He says he values the USA, but his actions show that he doesn't. In fact, everything he does is about tearing down, breaking up and unraveling the USA. Go figure.
98
@Don Judges. Say it over and over and over: Judges. McConnell and the GOP have only one thing on their brains: judges.
They believe that they can survive the Trump era and eventually rebuild the reputation of the party over time. They're not concerned about that part of it. What they TRULY want is a national judiciary that is dominantly conservative so that they can stop any liberal legislation that will find itself up for review. The judiciary is how the right plans to engineer permanent right wing minority rule.
The GOP is fully prepared to suffer ANYTHING in the short term as long as they get to pack the national judiciary with right wing lackeys.
Judges.
241
@Don
GREED! For money, for power, for ego.
3
I feel so much better now knowing our governing elites are either inept, corrupt, or malign, if not all three combined. This bodes well for our children and grandchildren for sure! Thanks, fellow Boomers! Now what?
26
@JohnXLIX
What "governing elites"? Do you mean Republicans?
1
Overall trade is just one consequence of anybody, anywhere doing business with President Trump.
Take, for example, Canada's current house arrest of Hauwei CFO Meng Wanzhou undertaken at the behest of the Trump Administration and then neither supported with any follow-up guidance nor even with information as to the status of American extradition intentions.
As a result, Canada is left hanging without resolution but with significant economic and diplomatic sanctions imposed upon it by China. In this contretemps, Canada's bigger problem is with the United States than it is with China.
With friends like the United States under the presidency of Donald Trump, neither Canada nor any US allies need enemies. Cooperation with Trump's America is almost by definition a losing proposition.
307
@John LeBaron completely agree. I don't understand why Canada doesn't just give the US an ultimatum. Come up with a plan to take her from us by a specific date or we release her.
67
@John LeBaron
Yes, thank you Donald Trump.
First you impose tariffs on Canadian steel because it endangers America's 'national security'.
Huh?
Next, you ask Canada to arrest Meng Wanzhou, presumably to protect America's 'national security'.
Huh?
As John LeBaron says, "With friends like the United States under the presidency of Donald Trump"...
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“Cooperation with Trump’s America is almost by definition a losing proposition.”
This is exactly what Trump says is driving his policies. The rest of the world has been taking advantage of us. Much to the delight of his minions.
The point of this column is that Trump doesn’t seem to understand that the whole idea was to bring the rest of the world up economically so that countries wouldn’t keep going to war over each other’s advantages.
The natural consequence of of such policies is that the US would be facing a more competitive world. Now, if we weren’t shooting ourselves in the foot by destroying the education system in the country, then maybe we’d be in a better position to compete.
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Yes, the US built a rules-based order out of enlightened self-interest. Self-Interest, because it immensely benefited the US; enlightened, because it also benefited war-torn Europe and Japan.
The EU was always a pillar of this order, which is one of the reasons why Trump hates it so much. But it is unfair to accuse the EU of a lack of political and military leadership. That's because the current world order was always meant and designed to be US-led.
For the last 70 years, the US has insisted that a US-led NATO would be the political and military muscle of the Western Alliance. That's why all European attempts at military independence such as the European Defense Community were strangled in the crib. And the British, always intent to reduce the EU to a free-market zone, undermined attempts at a political union, not least by pushing for the EU's rapid Eastern expansion, and watering down rules against wayward members.
Now with the British and the US on their way out, the Europeans must find their feet. And that's difficult, because their erstwhile American and British allies have thrown them in at the deep end, and not given them enough time to adjust.
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@EBurgett
Yes, the last two empires of the free world, American and British, abandon their leader role to the delight and advantage of Putin and Xi. What a disgrace!
we
We're entrusting the future of our republic with a guy who lost more money in the 80's & 90's than any other American? $10,000 a day, it's staggering!
His base doesn't understand or realize that we are paying for these tariffs. I know because the company I work for passes on a price increase to our customers every time we get hit with a tarrif. The people getting hit the hardest by higher prices are those that can least afford it.
I'm not suggesting that trade deficits don't need to be addressed, the do. However, having the worst businessman in recent history trying to fix this problem for political gain, what could go wrong?
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@patmurphy77
Your company should affix a sticker on your product explaining that the price has gone up thanks to the tariff imposed by Trump.
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That’s because the economy is not the #1 priority of this base.
The real priority is a combination of keeping minorities and marginal groups in check, stopping immigration and antagonizing Liberals.
The economy is a “nice to have” for the base.
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Unfortunately Trump is the only one who addressed the issue. The free trade world of today does a great disservice to American workers and largely benefits the wealthy. I have never understood the thinking about the new jobs created by free trade when we lost more as a result of free trade. Further our military treaties are outdated. If the Germans and the French don’t believe NATO is worth 2 percent why should we. Time to withdraw from NATO. Time to withdraw from Korea. It’s time to come home. Any candidate who at least pays lip service to these positions has a chance for my vote.
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Great article as usual from Prof.Paul Krugman.But he should have dealt a little more on why counter- tariffs negate impact of Trump- tariffs on foreign goods.If counter- tariffs become only a tax, then really international economists may be little impacted .
Will Tariffs on China exports to USA Will short- term damage Chinese economy? Comparatively American exports to China smaller volume .Therefore Trump feels he is” winning” trade war.
Prof. Krguman can suggest whether China has any way out
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@Dr.Pentapati Pullarao I'll ignore the typos and grammatically incorrect sentence structure here. But Dr. P P does suggest something I wonder about.
First though, let me say that I get ALL of what Krugman is asserting here. But to PP's point: If tariffs on Chinese imports act as a tax on Americans - and since a large part of those goods are cheap products - wouldn't the anticipated effect on China be a decrease in export demand? And don't I hear daily that Chinese politics is focused on improving their internal economics? And so wouldn't a decrease in demand for a good part of their exportable goods hurt the Chinese economy and thus support generally for their government? (I am not suggesting the Chinese government must respond as a democratically-elected government would in this case). However, I wonder if this effect isn't really what Trump's tariff war is expecting: to bring the Chinese back to the bargaining table, willing to reconsider their draconian policies as it relates to foreign companies doing business in China?
Just asking (I'm not suggesting a tariff war is a proper - or even useful way - to accomplish this).