Are we a country that really needs to start producing more steel? Are we going to innovate in an industry in which historically we already failed to keep up with?
How much steel are we really importing from China? I’ve seen as low as 4%, but others talk about trans-shipping, which could make the total higher. Is trans-shipping a red herring?
1
How might trade battles affect our ability to keep the Dollar as the world reserve currency. What risks are there for the US if China makes headway in this area.
1
Why did DT exempt Australia from the tariffs? What was the significance of Australia requesting DT to reconsider his decision to withdraw from the TPP? How likely is it that DT will move to rejoin the TPP?
If tariffs are imposed on Canada and Mexico, how should they react? What would be the smart thing for them to do in that situation?
1
Do you think that the recent imposition of tariffs on steel and aluminum are an attempt to support the candidacy of Saccone (vsLamb) in western Pennsylvania?
Why flare gas in an era of global warming? Saudi, N Dakota etc.
I remember an oil embargo so why are we exporting?
Loss of middle class means we are becoming a third world nation.
I know your answer to this one Humpty Dumpty Trumpty is not helping even with his tax cuts. Tarrifs will cancel out any job gains?
Are other countries likely to target specific industries and/or geographical regions when they retaliate?
is the steel and metal manufacturing infrastructure in the U.S. so destroyed and crumbling that we could ever globally compete again?
1
Mr. Trump ( whose grandmother spoke German, I guess) treats European allies as if they were ennemies. Does he consider us as a vassal continent? Would he like to get us on our knees? Is it this what he wants? Or would he like us, on the contrary, to be on our own? Without American bases in Germany? Would he like us to be nationalists ("Europe first"? "Germany first"?) With nuclear weapons in the hands not only of France and Great Britain? -- Economy: We accept Google, Amazon, Microsoft, Apple, American film industry; Ms. Joplin wanted a Mercedes Benz and her friends all drove Porsches ( and today BMW). They knew why. What about quality first?
2
Trying to find the lemonade in the lemons here...
I am a pet groomer.
One issue in my industry is our tools are no longer made with quality steel. They do not last like older / legacy scissors and blades still do. Would the tariffs somehow improve this?
*A girl can wish.*
How did international trade come to be the scapegoat for our economic ills, like skewed distribution of income and wealth, stagnant salaries, unemployment, underemployment, and so on? It's not so much about jobs, jobs, jobs, anymore with the end of the recession and unemployment rate at 4%, but why for most of us our jobs don't pay enough to keep us from treading water -- unless you're in the top 1%. Thanks!
When I read the president’s order on the steel tariffs I was surprised that they were on steel articles and not just on steel. I know the details are in the harmonized tariff code but I was hoping you could clarify this. All the news reporting indicates that articles made from steel are not covered but only the bulk steel is taxed.
Can Congress stop these tariffs? If yes, why are n't they? What can we the people do to stop this madness?
1
Brazil is threatening to retaliate against the tariff. Isn't that just as dumb?
How would China wind down its capital account with the US?
1
If I were the Prime Minister of Lower Slobovia and wanted to sell aluminum or steel to the U.S. and avoid the tariffs, couldn't I just "trans-ship" through my good friends in Canada or Mexico?
how can we stop China from demanding/stealing our intellectual property rights as a condition of doing business in their country, why can they heavily invest in the United States yet we can't in China?
Will we be able to undo this after this administration is voted out? Or does this have far too much long term effects?
1
Mr Krugman; how would you deal with China, they have huge stock piles of finished metal products along with copper and aluminum ingots. One of these stock piles, $ 2 billion of aluminum stored in Mexico, apparently to be surreptitiously shipped to the US as opportunities presented.
What would you propose doing different than Trump...except for the bull in the China shop style?
The US had a balance of trade (BOP) deficit of $566B in 2017. It has not had a positive BOP since 1976. Since 1996 we have had a BOP deficit of over $100B per year.
This is not sustainable. Is it not de facto proof that international trade is not working for the US?
Article XII of the GATT (1947) allowed "contracting parties" to limit imports to "safeguard its external financial position ." Has the WTO agreement removed this provision? Shouldn't the US invoke Article X11 of the GATT in any case?
1
If you were trying to explain this to a Trump supporter what would you say? You gotta explain this to the little guy... And secondly, specifically what corruption might you anticipate?
If it is true that China has been dumping steel in the U.S., that is, selling it below their own cost of production, isn't that why the World Trade Organization exists?
Why don't you, other so-called progressives and Democrats message like this?
Democrats believe in real, competitive capitalism not crony capitalism. Democrats really do support small business rather than paying it lip service like Republicans in Congress. Crony capitalism is NOT fiscally conservative because it does not maximize GDP and good jobs. Real competitive capitalism whereby small business is on an equal footing with large corporations is fiscally conservative. That's what Democrats want. Democrats are the real fiscal conservatives! Fox News is a tool of crony capitalists. That's their real purpose, to deflect Americans from the important issues of our time.
Democrats do not want to redistribute wealth. Democrats want to return the distribution of wealth to what it was when the United States was most successful. The current distribution of wealth is worse than during the robber baron era. If this continues, the United States will fail. By reducing this spectacular income inequality, the United States will truly be made great again.
Democrats agree that the marginal top tax bracket is too high, but that isn't the underlying problem. The problem is crony capitalism. The problem is that large corporations used to pay about 4% of GDP from their profits. Today, they pay only 2%. Where is the missing tax revenue? Well, that's where. Tax reform should address this issue while providing corporations incentives to repatriate their offshore capital.
Canadians are fascinated by the ignorance of Americans on most subjects. With respect to trade, how is it that American citizens do not know that the U.S. has a trade SURPLUS with Canada?
2
Is it legal or lawful for the President to make exceptions to a trade embargo? I hear mixed opinions. What is the story?
Not a strictly trade question: Which economists, who regularly communicate with the public in some format, whose intelligence and judgment you respect, do you disagree with regularly on issues that substantively affect the public?
I wanted to ask a more general question about trade, in that is protectionist policy in the form of tariffs ever a good economic policy aside from addressing egregious issues of dumping, etc.? It seems to me that this kind of policy always ends up being harmful to one's own economic status eventually. Is this the case, or do exceptions exist?
Have tariffs ever benefitted the country imposing them over the long term?
What is the best case scenario outcome? And, what is the worst case scenario outcome and could this be reversed quickly?
1
How will steel tariffs affect the price of guns?
Please comment on the effects this will have on the cattle producer, particularly with respect to retaliation and the probable loss of export opportunity. This will really hurt us as cattle producers at the primary level if beef exports decline. Very worrying - and appears to be ill-considered in our opinion. Thank you very much for this opportunity to obtain wise counsel.
1
Ricardo's comparative advantage analysis, suggest that under free trade, the terms of trade for any country will be determined by the most efficient industry, which for the U.S. is technology. I also remember the national account identities, which suggest the trade deficit is a consequence of overconsumption. In my view the root cause of American trade deficit is overconsumption and tariffs are a terrible tool to address this problem which is also exacerbated by the USD being the reserve currency. The idea that the U.S. trade deficit is the result of other countries taking advantage of the U.S. is pathetic. The current International Trade framework was developed to suit U.S. geopolitical objectives in the post second world war era.... U.S. corporations at the end of 2017 had over $3 Trillion in profits held offshore,... so here are the questions:
1- How would you apply the comparative advantage framework to analise the shifts in the U.S. economy over the last 30-40 years, the tech industry and other high return industries vs. the legacy industries such as steel. Which other industries are in peril and what should be the response of public policy?
2- How should we think about overconsumption in the U.S. in the context of the trade or current account deficit?
3- To the extent that there is cheating today, e.g., access to Chinese market is harder, what is the appropriate policy response?
4- How can we weave in market access through direct investment in the fairness debate?
1
If Canada is our largest supplier of steel and aluminum, and Trump exempts them from the tariffs, then how much will the U.S. be negatively affected?
Preface: I can’t stand President Trump and his agenda . But...
Question:
-If his tonedeaf approach to common sense policy making actually can return jobs to America in steel and Aluminum, wouldn’t that be a good thing?
-what do you see as the unintended consequences of this approach?
Thanks.
Overall more jobs lost than gained. Higher prices for consumers. Inflation. Higher interest rates. Lowering stock market.
Joe Scarborough continues to say Trump’s tariffs are all about the Pennsylvania U.S. Representative election in District 18. How diabolical would that be? Yet it is political economy, right?
What will the money from the tariffs be used for?
Is specific fiscal revenue allocated?
The bull market has been running tirelessly for 9 years. At this point in its streak, is it more sensitive to disruptions like a Trump Tariff? Job creation and unemployment outperformed predictions for February, pushing the market higher. But how can this continue if we enter a trade war?
Europe has expressed outrage, but isn't reacting with tariffs on cranberries, orange juice (and possibly corn) a bit of a timorous measure? Steel has been a central product for social and economic progress since the industrial revolution. By comparison, limiting the flow of cranberries (etc) into Europe from the US seems a paltry or even symbolic response: is the EU intimidated somehow?
What is the likely economic impact on GDP snd jobs of the the trade retaliation measures being considered by the EU?
Hello,
As I understand it, the US has a trade deficit of around $550 billion. You often hear that that’s not necessarily a bad thing considering the size of our imports/exports. Not taking into account specific effects on certain industries, is there a level of trade imbalance where you start worrying for a country? And as it inches towards that troublesome level, how does it manifest itself in our economy?
Thank you.
2
Wouldn’t the world be better off with Trump preoccupied with investigations (especially if Dems control one or both Houses) and legal issues (which is a near certainty) for the remaining three years then having Pence or Ryan at the helm? Thx
Paul,
Perhaps less on trade wars and more on tactics. Observing the past few days it seems Trump takes this as a bug ego trip, and those who know how to play get leverage: Trudeau for Canada, Turnbull for Australia. Ttump also mentioned Macron for France.
Trump has a childish approach to ask foelr personal attention. This also implies the WTO, or classic negotiation at lower echelons, have zero influence on all this. And that an institution like the EU; with many leaders and a consensus voice, will struggle.
In that light I somehow get this worrying feel Kim Jong Un has figured out how to charm Trump, and is now taking him for a ride.
Things will have to get worse before they get better.
This is an easy one. What historical evidence do we have that shows us the outcome of tariffs and trade wars? Who gains and loses?
Why does the US buy steel from Canada instead of also making that portion of the steel we need ourselves? Is it cheaper? If so, why? Canada can't be using cheap labor practices we abhor, so what are they doing that gives them a surplus attractive to us, and why don't we do it?
I remember how the tech industry, Microsoft, saved Medicare and the budget back in the Clinton years... why can't shale oil do the same thing now?
Thanks!
When we destroy community-based manufacturing, what policies have really worked for the people cursed with having to rebuild their lives?
What are Congress’s options to block the tariffs? Thank you.
Are trade deficits inevitable and are they inherently harmful?
Good afternoon Dr. Krugman.
If trade barriers and economic sanctions both constrain trades between willing counterparties in the two countries, what is the difference between Mr. Trump’s steel tariff and an economic sanction on the USA?
Since the recent tariffs on Steel and Aluminum do not meet the test of national security issues, why is Trump getting away with this? Is the Congress suppose to keep him in line (that’s unlikely), the courts, a lawsuit? And then what do these tariffs ultimately do to the WTO and NAFTA arrangements? One man should not have this much power!
Professor:
Exactly why did the US metal industries abandon their plants, and, aside from duller sunsets from mid Pennsylvania to Illinois, what was the effect on mill owners, taxpayers, including the funding of Superfund cleanups, and the people in towns like Bethlehem, Pa. Why weren’t the mills updated and replaced with Japanese-style mini-mill technology instead of abandoned, and why does the US still export scrap metal to India and other nations rather than recycle here? How long would it take to put a clean well-designed series of efficient minimills in place over the graves of the old mills and would there be employees to run them. Lastly, explain, please, the fallacy of “renewable fuels” burning things that can be regrown for power and their greenhouse gas production rate. Compare to negative carbon-footprint systems, like windmill or properly built (non-polluting)solar electric technology to run the mills, and current problems building those systems. Lastly why the precision tool industry moved from the US to Europe and Asia, the inexpensive tool industry, to China.
I know the answers, readers will take you more seriously. Nobel Prizes do that, as do your highly respected jobs in higher education and your NYT column.
President Trump say we “lose” when we have a trade deficit with another country. But doesn’t a trade deficit with another country mean our economy is doing well, as we have the means to buy the other country’s goods?
My question: How will the proposed steel and aluminum tariffs impact the everyday worker (middle class America) over the short and long-term?
Can you rebut the argument of Wilbur Ross that Trump tariffs can only raise the price of a beer can just a tiny bit, so it's not a big deal?
Instead of a Trump initiated broad-brush tariff methodology, what tariffs would make sense? If any, with what countries? Why? What derived benefits could/would take hold, for example, more jobs; reestablishing Rust Belt industries; lower costs to consumers?
Elizabeth Warren has talked about the need to renegotiate trade agreements. She argues the agreements favor large corporations to the detriment of workers and small businesses. What do you think about this?
1
Dr. Kugman, a followup, please:
Mr. George Soros said (I paraphrase), in an interview just a few years ago, that the winners in free international trade, such as wealthy investors, profit so much from free trade that they could compensate the losers, mainly workers in formerly “protected” domestic industries, and still profit, but they don’t.
Would you concur with this idea? And if so, what forms might the compensation take?
Care to handicap the likelihood of whether a red-blue pro-trade coalition in Congress will, as they are empowered to do but seem strangely ambivalent to do so, produce countervailing legislation? If they don't, what's the hold-up?
SIMON
My question is about the economic soundness of Trump's protective tariffs. There is a long history of tariffs to protect nascent industries in a developing industrial economy. These new tariffs seem more politically motivated than anything else. What is your take on it?
1
As far as not being able to sell our agricultural products to other countries --lower demand means prices will fall for Americans. Considering that 50 million Americans suffer from food deficits won't tariffs on our agricultural products be a good thing?
1
Good for whom? Do you think casting the whole agricultural industry into disarray and causing farmers and ranchers severe economic distress would be useful?
As a rancher, I would far rather pay higher taxes to help disadvantaged fellow citizens than see a lifetime of hard work brought crashing down because of a thoughtless gimmick.
Not if it puts farmers out of business.
I remember in under graduate school (1964) studying President Kennedy’s Trade Expansion Act of 1962. This was in a political economics class. What was the significance of this Act and was it bi-partisan? Also recommend some readings on political economics.
5
Pro trade-ists assert that US consumers have reaped benefits from free trade in the form of lower prices. Is there a way to calculate that benefit? Has it been done, and if so, what is that amount?
1
I have always been curious about the transportation costs for commodities. Per ton (or 20 tons), what portion of the total price is "average transportation costs" for such items as 20 tons steel, wheat, clothing, or millions of gallons of crude oil? It seems to me the shipping industry will be adversely affected when foreign goods to any country might slow to a trickle over trade wars.
Don’t exceptions to the new tariffs for our largest trade partners for these metals by volume (Canada and Mexico) minimize the impact to the underlying clearing price hike for these goods within the US, effectively negating their benefit to steel and aluminum manufacturers In the US?
1
Is there ever a situation where certain tariffs are beneficial? Why?
1
Is there an impact in the calculation of the trade deficit numbers that considers the exchange rates between the US and its trading partners? I'm thinking for example Canada. The US could spend more dollars purchasing Canadian goods than vice versa, however each US dollar buys $1.30 worth of Canadian goods. Could this overstate the deficit?
1
Seems like these tariffs will make construction costs go up, will invite retaliation from other countries which will make prices go up, and thus will impact retailers and make prices go up. And if prices go up, demand goes down and we’ll all have less money in our pocket as nobody’s buying what we’re selling.
Yes? No?
1
a followup. please: If the tariff results in higher prices for imported steel, and for domestic steel, and if demand declines with consumers seeking cheaper substitutes or simply contracting their budgets, then won’t domestic steel plants reduce their production, and won’t the managers’ incentives lead them to lay off workers? How rapidly will the scale of steel operations shrink? How much smaller will domestic steel plants be a year from now? How many workers will they have laid off a year from now?
Oil and gas production and transportation require a lot of steel pipe. My understanding is that much of that pipe is manufactured overseas. What do the steel tariffs do to that sector of the economy— a sector Trump says he wants to boost to make the US energy independent?
What will this do to my daughter's generation? She is 19 now. She studies environmental science in college. Thanks.
1
This globalization has led to some remarkable gains for man at decreased unit costs but appears to increase environmental costs, e. g., with these huge container ships, one of which is now burning in the Indian ocean with 15K containers. Maybe some protectionism is better and in order? Thanks Professor PK!
Was it protectionism or giving US companies, for instance Apple Computer to move its IP off-shore, just a couple of decades after it was a crime to even export a PC to many nations.
China, using both US chip and assembly technology and its own IP based on what it received. now has the “fastest” computer, when measured in terms of trillions of floating point operations per second( teraflops).
This is more if a “showoff” machine ( as in my button is bigger than yours), not that much faster and POSSIBLY less efficient than any other nations’ hypercomputers, generally in the hands of defense and aircraft designers, the latter a probably long-run inefficient method of dealing with turbulence and chaos mathematics, and by spy agencies to crack cryptology, the industry first launched when Alan Turing designed the “Colossus” to break Germany’s Enigma Corp.’s 12-rotor Lorenz encryptionMachine during WW II.
Will rising interest rates cause a severe correction in the stock market? If you can return 5% in bonds will all the institutional money leave equities and move to bonds?Also what will happen to US real estate if the 30 yr moves to 5%?
1
My question - I've read a variety of economists' views on this matter and none of them feel that imposing tariffs will bring the desired (stated) results. Most do worry that the result will be weakened relationships with important allies. Given the fact that our president is not: 1.) imposing the Congress-approved sanctions on Russia, 2.) ensuring our next elections are protected (with money set aside for that purpose), or 3.) even giving lip-service to protecting the country from Russian aggression, is it far-fetched to see these tariffs as one more action that benefits Russia?
2
My question was answered when I started reading the other questions & replies. Very helpful.
One of the chief concerns in the developing world is that "free trade" has allowed US and European agriculture (recipients of heavy subsidies) to undercut produce from Latin America, Africa, India etc. So, in fact, trade has not been "free" at all but has been a game played in a market with rules and practice heavily weighted in favor of the richer nations. Call this a question.
2
My question for Mr. Krugman is whether we have been at all successful through the use of trade policies in forcing other countries to adopt appropriate environments, governance and labor policies in the industries that export to the United States. Thanks!
2
Better stated:
Why haven’t we required our trade partners to treat their employees in the same manner as US employees?
More importantly, what has the economic and political fallout been of the US and the EU NOT requiring employers of trade partners to treat their employees the way (or at least the way once did late last century) we do: mandating they receive the same pay, collective bargaining rights, medical insurance and vacations as their “first/second world “ counterparts, providing an overall larger market, especially if those companies are absolutely US or EU firms: Intel chip fabs and Ford car plants around the world.
Aside from shrinking Nativist paranoia, what has the effect been of Friedrich (air conditioning) moving its compressor plants for high-end machines from the US to Mexico, and either contracted with Pacific Rim companies to either build its window units or apply its name to their own products, just an example I know of.
What has been the effect of technology transfer when Intel builds 3rd world plants and General Electric, Black and Decker, Milwaukee tool, Bosch, RCA, (Div of GE?) exist only as importers of tools made at least contracted to their design specifications; Eveready, the old American battery company first sold its Energizer advanced, high-efficiency battery division to Asian firm, then sold the rights to its trademarks and “story” to Asian firms producing cheap carbon-zinc batteries under its old Nine Lives trademark
A correction to my prior comment. The 9.693 TRILLION dollar trade deficit is the total from the start of this century not this decade.
An article in the New York Times from a year ago "Building Trade Walls" show the average tariff and VAT for a number of countries around the world.
https://www.nytimes.com/interactive/2017/business/trade-china-protection...
For the USA it is 9%, Germany 24%, China 27%, Brazil 31%.
Our trade deficit and inequality have spiraled upwards since the late 70's. Discuss the connections between the tariffs-VAT sum and trade deficit. Discuss the connection between trade deficits and inequality. Tell us what a good trade policy for the United States would look like or is the status quo just hunky-dory?
4
Would add discussion of currency manipulation and how that impacts cost of trading.
Wow, snarky liberal banter to make personal attacks is no way for anyone to successfully make their case for a position. One again those who subscribed to a failed liberal biased "conventional wisdom" will have trouble understanding the logic and the success that Trump is having in the economy and in foreign policy.
With respect to North Korea, Trump did not just show North Korea a stick. He put them in a vise. He showed Kim a stick that was dedicated to personally target Kim. (Dictators hate that). Then he closed in China on them, during his summit with Xi he made it clear that trade policy and foreign policy were intertwined. China was dragging its feet on clamping down on North Korea so out come the tariffs.
The political outcome is even more astounding a double victory. He has completely destroyed the incompetent, mad man diatribe and by using trade policy to achieve it he has brought more folks in to his camp that represent the largest sector of the traditional democratic base white male blue collar workers living in the swing states.
Kim made Trump an offer he couldn’t refuse, otherwise it would have looked as if Trump did not want a diplomatic peace, and it was announced to the American public by the SK envoys. Not Trump. Not Tillerson. Weird!
Trump had publicly berated Tillerson for having discussions regarding the North, as a waste of time. And now this! If it happens it will be a win for Kim, not Trump, who now possesses more leverage to negotiate. First Putin, now Kim. Wow! Who’s next, a dreaded Democrat majority in congress?
It is highly unlikely Kim would surrender ground without concessions, such as reductions in sanctions, financial aid, and what he most greatly wants, the removal of U.S. troops in South Korea. I think this is Kim’s long game.
In the long-term Kim wants to have a reunification of the peninsula, and with the present dovish South Korean president Moon, he is trying to capitalize. Kim wants to lessen our presence and influence in South Korea. During the campaign Trump did question our purpose in being in Korea for so long. With this knowledge Kim is now making the strategic move, first cozying up to Moon, and now Trump, to play along to appear to get along. His objective - reunification and eventual control of the peninsula, and Trump just might make this long-term strategic intent come to life if not careful.
United States is the biggest importer of both steel and aluminum in the so it has an enormous market power. Why is it bad for the United States to use this market power to raise revenue by imposing tariffs and protect its producers-and workers- from global competition at the same time?
1
Hi, I have some questions about how well (ideal) free trade works for individual countries, rather than for the world economy overall. I think that the answers to these questions would be important for making public policy.
Q1. There appears to be consensus that free trade improves economic growth. That means that it improves the sum of economic growth over all countries. So the sum is greater, but is there any proof that every country's growth will improve - or is it only the sum that improves? Could some signatory countries be left behind?
Q2. Is there any reason to believe that this growth is insensitive to significant amounts of cheating on free trade? In other words, does a free trade policy improve economic growth for everyone in the presence of cheating.
Q3. Are the incentives for cheating small enough in comparison to the benefits (both political and economic) that we can presume that countries will not cheat?
Q4. If countries do not maintain the threat of pulling out of free trade agreements, is there any reason why the other signatory countries will remain faithful to the agreements?
3
Does the tariff apply only to raw steel, or to products made from steel? For example, the average refrigerator contains 123 pounds of steel. Is that subject to tariff? If manufactured steel products are exempt, doesn’t that drive manufacturing overseas?
3
What economic effect would tariffs on steel and aluminum content in commodity products from abroad induce if included in the currently enacted tariffs. E.g., a car built in Mexico with "dumped" steel/aluminum from any country would be tariffed according to the tariff on raw steel/aluminum from that "dumping" country. Thus: Consider what it means if Russia sold steel/aluminum to China at below market rates, and China made pots, pans, etc., etc., etc., to sell in the USA with prices price undercutting USA producers of the same commodities. Is that "dumping" of any consequence economically in these USA tariffs? If not, why not?
1
Question re: Trump and Trade:
Loose Cannon seems too benign a label for a president who just makes things up about trade. What are the available and effective tools for protecting ourselves and our futures from Trumps whims?
1
You state that consonant with existing international trade agreements, narrowly-targeted tariffs can be imposed without “breaking the system”. Can you give a detailed example of a situation where this might obtain? What comes to mind is e.g. protecting access to rare earths for high-tech electronic purposes; would there be a national security issue here?
2
Can a president unilaterally impose tariffs simply by stating they're for 'national security??' Does Congress have any power to remove them, assuming they have the will? I never realized how much power ONE person can have...
2
What will be the effect (direction and magnitude) of the new tariffs on our rate of inflation? Aside from the important question of whether the U.S. will lose net jobs as a result of the tariffs, isn't inflation in the cost of consumer goods and services also a critically important issue in connection with these tariffs (Wlibur Ross notwithstanding)?
1
Is there a case to be made for protecting businesses with high barriers to entry ? Once this type of domestic business is driven from the market by a foreign government, the domestic business could not readily restart- even if the foreign government ceased unfair trade practices.
Do you consider the aluminum and steel businesses to have high barriers to entry?
2
Has anyone done a comprehensive study of the net results of open trade? To economists, all economic activity is good and growth is automatically defined as a positive force. If one million people lose their jobs but the economy hums right along, no problem. It seems to me we've signed on to a bad deal: lower prices on consumer goods but the trade-off has been the evaporation of many jobs across America. How have tariff's worked out in developing nations which have used them for many decades to protect early stage industrialization? We are a richer nation because of international trade, but we might be even richer and stronger if we hadn't opened the flood gates to trade and foreign competitors selling their goods here. Is it possible to understand the results in their totality rather than isolated benefits?
2
In the decade of the 1980s total US trade deficit was 927.25 billion dollars. In the 90s it was 959.5 billion. So far in this decade the total US trade deficit is 9.693 TRILLION as of the end of January. Our great country can not survive this catastrophic out flow of funds. How would you suggest we fix it? Thanks for engaging your readers in this important discussion.
2
your column Saturday led me to refresh my economics studies several decades ago. While history never exactly repeats itself, we are - I think - now quite close to repeating the beginnings of the 1930ies.
The numbers seem to have grown, but has the economy grown also, so that the percentage has not increased as much as the gross? please provide percentage and gross to gets better picture overall.
An older friend said that the US, as the only viable trading country after WW2, gave many concessions to trading partners; that many of these were still in place and should have been dealt with years ago; that Trump is trying to deal with them now. Correct? Worth discussing? Thanks!
5
Question: trade theory seems to posit multi-lateral gains from trade but these are not (necessarily) national sectoral gains. I.e., the obvious, US steel production was supplanted by more efficient (or at least less costly) foreign steel which was a boon to auto manufacturers and the construction industry in the US but not so great for US steel workers. Economists seem to think that somehow this will be offset by national readjustments in the long run, but as some wag once said, in the long run we are all dead.
So the question is, how does a nation reasonably respond to trade pressures on particular sectors? And I suppose the secondary question, is my positing of off-setting sectoral effects a reasonable way to look at this. Thank you.
1
When I look at China’s trade balance with its trading partners since entering the World Trade Organization, it seems to me there is a pronounced pattern of surpluses with only a handful of deficit spikes. Many would argue that this is evidence of China’s neo-mercantilist export strategy. I get it that if China consumed more and saved less it would be in greater balance with the world. However, can we discuss trade and China without considering non-tariff barriers, subsidized capital to favored export industries and an undervalued and pegged currency- the mother’s milk of neo-mercantilism? Specifically, can you explain how is it that our large and persistent deficit with China has not corrected itself through the exchange rate? Is this simply a function of the dollar being the world’s reserve currency? Please explain.
4
Anti-global trade was once the province of the left, which organized the anti-WTO protests in Seattle in 1999. How did it become the province of the right?
Can you comment on the editorial by Daniel MvCarthy in the Times? Specifically how tariffs maintain the middle class.
1
Many articles on the state of the economy point to how long our economy has been expanding, implying that historically we are overdue for a downturn.
In 2008, we all learned about the contributing factors to the Great Recession such as sub-prime mortgages, under-capitalization of banks, and obscure financial instruments like CDOs.
So my question is - what are the ticking time bombs that the public is unaware of that could trigger the next recession (other than the actions of our stable genius and his "best people")?
1
Can you explain the reasoning behind denying that a VAT is a form of tariff, at least when applied to exports from a production-taxing country like the US?
To my thinking, if we consider that a large portion of VAT is refunded to domestic producers so that they can pay for roads and infrastructure that are necessary to their production, along with national defense and law enforcement to secure their capital investments, then a VAT looks an awful lot like a tariff: both imports and domestic-production-consumed-domestically pay it, but the latter has most of it refunded to pay for inputs to their production.
Obviously, VAT is not refunded to domestic producers to pay for roads and infrastructure or national defense and law enforcement (at least not in any example I know of), but VAT does help to pay for roads and infrastructure and national defense and law enforcement, to the benefit of domestic producers. And the difference between these is mostly accounting.
So why do you and other international trade economists insist that a VAT (or a national sales tax or any other sort of consumption tax) is nothing at all like a tariff?
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Questions for Professor Krugman: Do tariffs ever make sense, i.e. increase welfare? Does it make a difference if the country is big or small?
Second question: what is the definition of "fair trade"? I understand the concept of free trade, but fair trade?
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Question for Professor Krugman: I seem to recall economists linking the Smoot-Hawley law to the Great Depression. With 85 years of analysis, what is the economic consensus on the effect of Smoot-Hawley with respect to the Great Depression?
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I have sourced medical devices worldwide for 20 years
The complaints I hear about foreign imports - cheap labor, non-existent employee safety, quality or environmental regulations are in large part all true. Even in the regulated medical device industry, I’ve seen some Chinese companies buy their ISO certificates from shady Notified Bodies.
That said, I believe the key to fair trade is not hammering only on price (a race to the bottom that only encourages employee, quality and environmental corner cuts), but on normalizing the manner in which key products are manufactured via regulation.
Please consider that we already have much of this mechanism in place for regulated medical devices and drugs. We already require that all imported devices are manufactured according to our FDA Good Manufacturing Practices and are audited for compliance. This not only encourages but requires that foreign companies at least do all the same things that US companies do to manufacture the same products. We can do the same to a lesser extent for other key industries.
From what I’ve seen, this results in better working conditions and higher wages for foreign workers or US sourced devices.
There are cases where the quality, delivery and prices are better from a foreign supplier. In a more normalized trade environment, it should be perfectly ok to buy these products and push domestic manufacturing to do it better.
We should use our surgical tools to incentivize the desired outcomes.
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Given that there's rarely any logic in Trump's erratic 'policy positions' and that the net effect of steel and aluminum tariffs is a large number of US job losses (even if some steel mfg jobs would be gained), if he actually exempts 'allies' like Canada, Japan and Australia that provide most of our imported steel, is there any way to estimate the impact on domestic steel and aluminum mfg jobs from what would be a much smaller number of countries subject to the tariff? This seems more like pandering and political theater (no surprise) than an actual attempt to revive those domestic industries.
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What do you think about current account surpluses and deficits? Whose responsibility is it to deal with these imbalances; deficit countries or surplus countries? How do they go about fixing the issue (especially if the trade imbalance is massive)?
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If Trump’s trade tariffs are so bad, why did the stockmarket jump up 440 points on the same day that Paul Krugman published his article explaining to the world why the tariffs are such bad policy?
Actually, the stock market fell precipitously when Trump announced his policy which at the time inclulded Canada and Mexico. Then it came back a little when Trump excluded Canada and Mexico. It jumped 400 points the day the jobs report was issued.
If you were on a debate team and you had to argue in favor of these tariffs, what would you say?
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Why has the DOW gone up after this decision?
Two people go to market. One goes home with a basket of goods and a haircut and the other goes home with aching fingers (from cutting hair) and a pocketful of green paper. Who ‘won’? If they both die tonight, I know who won. If not, come back in 10 years and review: maybe one’s life was definitively improved as a result of their transaction and the other’s has been damaged, or maybe they both curse the day they met, but probably each is somwhat better off as a result - which is why markets exist and persist. WHY would anyone believe one can evaluate a transaction from just knowing who got the goods and services and who accepted an IOU, and WHY would anyone believe the advantage was on the side of the one who took the green paper? Especially, why would the self-styled ‘king of debt’ make that argument - unless he’s playing the long con????
With each new unhinged declaration from the Trump wing, my husband and I are terrified that we will suddenly be facing another economic collapse like the several we have lived through that swept away virtually all our retirement savings. We are only a couple of years away, so one more devastating loss would be permanent for us. To what degree could we be on the verge of another market collapse, as we saw in the late 20th century, and again in 2007? What are the signs to watch for that this may be eminent?
Aren't the main American beneficiaries of free trade big corporations, 80% of whose stock is owned by the 1%? And doesn't the "cheaper goods for American consumers" paradigm force Americans to walk the isles of WalMart to find bargains that cost fellow Americans to lose their jobs to foreign workers forced to work in squalid conditions at poverty wages with no benefits? And would you agree that our State Department and military, to a large extent, engage in foreign policy objectives that support our large international corporations at the expense of average Americans, who pick up the tab for these operations with the taxes they pay? Isn't it true that in the post-WWII period our large international corporations have become more globally oriented, paying less taxes in the US, caring less and less about Americans and more and more about global success?
Now I would ask: How did we get into this mess? I think the answer is unbridled capitalism. My question for you is how do we start making America work for Americans again?
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Trump's steel and aluminum tariffs are great for steel and aluminum manufacturing companies and their workers. But what about the hundred million other workers not working in that sector?
American Job Creators, have made a conscious decision to move manufacturing to cheap-labor countries in order to maximize their profits. The cheap labor, and lax labor protections in those countries allow job creators to make maximum profit for their shareholders at the expense of American jobs.
Why not consider a "wage tariff" on countries dumping cheap foreign labor onto the world market? Putting a floating tariff on the wage component from those countries to offset the "comparative advantage" of that cheap foreign labor.
Wouldn't that be at least a more direct way to convince American Job Creators to manufacture domestically, employing American workers? And it would also remove at least some of the comparative advantage for foreign companies who flood our market with those same type goods.
Wouldn't a wage tariff benefit American workers, yet be neutral to companies?
It seems to me that modern trade wars are not fought with tariffs, because they are too transparent. Trade wars are now fought with subsidies. Boeing is a huge industry in part because the US government finances other countries' purchases of airplanes manufactured in the US. So Trump is using a 19th century tactic to fight a 21st century war. Do you agree?
How is Trump able to impose tariffs on imported steel and aluminum? Doesn’t he have the power to impose tariffs only in instances when the national security is threatened by imports? If Trump does not have the power to enact these tariffs, and is in violation of the law, by so doing, how is he able to do so? Please explain. Thank you for your insights, Paul.
Given all the negative effects of trade tariffs, as you have so well explained, why are some democrats supporting them? Is it the belief that they will save jobs; is there an underlying political objective?
Is it too much to expect that a President claiming to be a Wharton grad understands basic David Ricardo. The laws of comparative advantage have not become obsolete.
What are the worst-case repercussions of these tariffs when our trade partners retaliate?
What is the key argument of commerce secretary Ross that may have given Trump the impetus he needed to proceed with the tariffs when a clear consensus against them has emerged both here and abroad?
How soon after implementing Trump’s tariffs could an economic impact be felt?
Is a trade deficit necessarily a bad thing?
Economics teaches that, while there are overall gains from trade, there are also losers and the winners should compensate the losers. So how do you propose to make the losers - in the US, mostly less educated folks employed, or formerly employed, in manufacturing- whole? A once well-paid factory worker now making $10/hour at Home Depot is not some benighted fool who doesn’t understand economics. She is one of the losers in the international trade game and knows it. Where’s her compensation?
Hi Paul, I read your stuff constantly and really enjoy your scholarly economic take, along with the Trump stupidity. So my question is: Doesn't Congress have some recourse in a situation like this where a president is acting against both houses? How can it be one ignorant man's decision to cripple the world economy? Thoughts? Thank you, G
When President Bush JR imposed steel tariffs in 2002, Wilbur Ross and his associates bought various troubled US steel companies and conglomerated them into International Steel Group (ISG). After successfully declaring bankruptcy and thereby forfeiting the company's pension and environmental cleanup obligations, he sold ISG on to Mittal. Mittal has since sold it on to Russian oligarchs. Everybody made money, except perhaps the US taxpayer that is absorbing pension and clean up costs at various superfund sites. How are these companies operating now? Are the plants still employing as many US workers? Has Mr Ross ever commented that the lifting of the Bush steel tariffs in 2003 (acknowledged as a mistake) had anything to do with the sale, or given any other reasons? My memory of the incident was that the imperative was to keep the mills open and employees employed, and that national security was not brought up at the time. I have read that Mr Ross and his associates walked away with $2billion for the deal. Is this true?
President Obama was certainly right when he called out people who don't acknowledge the role of government in creating their wealth. The best way to rob a bank is still to own one.
Is it possible that a trade imbalance can be “balanced” by the creation of more jobs with the imported goods?
What incentives can the US employ to encourage the building of strong local economies in areas of the world where desperate people are fleeing from?
How would you respond to the article published in the Opinion section today "Inflation? Bring It On. Workers Could Actually Benefit."?
How far can get a president "alone" (I mean without the chambers backing him) in the way of trade war(s)? What are the mecanisms of check and balance on the fate of economic policy ?
These measures are not out of economics and national security concerns - they are primarily meant to satisfy the President's electoral constituents. In doing so these measures will all likehood reduce the rate of growth. What the President should instead be is working with the state, local govts and private sector to educate the new and existing workforce for the digital and A.I economy!
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Would really love to read your thoughts in response to Daniel McCarthy's pro-tariff piece published in these pages.
One more question: are there any good books you'd recommend to better understand trade systems?
The generally recognized standard for trade relationships seems to be free, fair, and reciprocal. Does China meet these criteria when it comes to steel production? Or, as critics assert, are they “dumping” into the market as a result of excess capacity and subsizided costs? If such claims are true, if tariffs are not the appropriate response, what is?
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Hello Mr. Krugman :
The major complaint seems to be that free trade is hurting US workers in the manufacturing sector.
Why aren't there strict rules in these trade agreements requiring countries like China, Mexico, Bangladesh and Honduras to upgrade their workplace safety and environmental standards to a higher level ? This would be more humane for those workers, better for the environment and would make US manufacturing companies more competitive.
Why is it called "free trade" when a lot of the product flow is simply the movement across borders of parts and materials internal to a particular industry ?
Isn't this just securing cheaper international supply chains rather than fostering the manufacture of domestic products which can then be "freely traded" to other countries ?
Thanks.
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Isn't the argument being put forth by the administration to justify the tariffs self-defeating? When Wilbur Ross holds up a can of soup and says the tariffs on steel and aluminum are insignificant, doesn't that suggest steel and aluminum importers will ignore the tariffs and continue to import those metals and these tariffs will not help US steel and aluminum manufacturers or their workers?
Hello Dr.Krugman,
As far as I know, a small country is definitely worse off if it imposes tariffs on imports because tariffs create a 'deadweight loss'.
When a country imposes a tariff on imports, consumers loose. Some of the loss of the consumers turns into gains for domestic producers of the product ; some of it becomes a revenue for the government and the rest of the loss will simply disappear or turn into what we call a 'deadweight loss'.
Yet, the case is different for a country with a relatively large economy because a large economy can affect the world price of the product with its market power. It means that it can potentially-even if not necessarily-collect more revenues from the tariff than the amount of deadweight loss and therefore better off.
Given that the United States is the biggest importer of steel in the world, can not it gain from this tariff by accruing more revenue than the deadweight loss of the tariff?
There is a lot of controversy about Trump's trade policies and the recent tariffs on steel and aluminum in particular. It seems people are confused about "free trade" and "fair trade". Free traders want to adhere to the principle of unencumbered trade at any cost whereas Trump and his supporters believe in "fairness" in trade. Standard economic theory tells us that trade benefits all countries regardless and this idea goes back to David Ricardo's 1817 Principles of Political Economy. Free trade is based on natural comparative advantage of nations which is principally fair. However, subsidies and trade policies artificially manipulate (dislocate) comparative advantage to benefit certain countries against other nations. For years, U.S. relaxed trade policies enriched countries like Japan, China, and Korea. Our chronic and sizeble trade deficit ($566 billion in 2017) promoted Trump Administration to counter this trend through protectionist measures.
Thanks Paul, for everything. I read your column every week and have read one of your books.
Do tariffs tend to increase or decrease income inequality? Much of the frustration in our country, I believe, stems from the fact the globalization seems to have left many behind as industries and manufacturing has moved overseas. What will be the effect of tariffs on the working class?
Its so basic but I just don’t understand why a trade deficit is acceptable, not that recent tariffs will change much.
If steel prices are artificially higher in the US, won't this have a tendency to drive industry offshore?
Thank you for taking questions, and congratulations on your prestigious recognition of your exemplary work.
I would like to ask some simple questions:
Why do we engage with the world in trade at all? Is it feasible to only trade with countries that we share land borders with?
How is our role in trade related to our world significance?
What would be the economic benefits versus drawbacks of becoming a independent of international trade?
Not necessarily a "trade" question.
One of the main points of Commerce Secretary Wilbur Ross, in favor of the tarrifs, is that national security is threatened by the fact that the United States now has only one steel manufacturer capable of making helicopter parts, and only one aluminum manufacturer capable of fabricating that metal for military uses, etc.
If the above is true, does national security warrant a President in "protecting" an industry deemed vital for military purposes?
After all, in times of crisis, it may be a bit much to request the Chinese to build our warplanes or tanks.
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In Australia all we hear are Trump's complaints that the US has been the big loser in its recent trade deals. The rubbery numbers he quotes have not been countered with reputable stats about what the net gain to the US has been. I'm sure you'll have something to say about this. On the other hand the proponents of free trade generally assert that it always works out as a win:win for all parties. That's not been our experience in Australia and we were especially wary of the TPP's impact if American had stayed in, especially in the leverage it would have given US drug manufacturers to charge our healthcare system higher prices. The benefits of free trade agreements are not just a matter of the 'art of the deal' but the relative power of the different countries who are negotiating them.
Trump is clearly grandstanding. That's what he does for a living.
A question is: is there anybody identifiable whispering in his ear in terms of policy on this, or is it pure demagogic grandstanding. I'm thinking, for example, of the Op-ed piece in the NYT today by someone whose name I won't bother to look up who was making a "principled" argument for tariffs based on the thesis that the liberal consensus on free trade is a dogma which is not addressing all of the right issues, and deserves to shaken up.
And that is all Trump is doing.
So?
How about the national income and product accounts:
product:
Y = C + I + G + (X - M)
income:
Y = C + S + T
Therefore:
C + I + G + (X - M) = C + S + T
Cancelling consumption from both sides and grouping terms we have three balances:
(S-I) + (G-T) = (X-M)
If we are going to run a government deficit, and also want to eliminate the balance of payments deficit (ignoring the different types of foreign balances) then we are going to have to decrease private investment or increase the savings rate. I know that there are a lot of dynamic paths here between one year's accounts and the next year's, but how can we rebalance the foreign account after a big tax cut?
Just a thought from a US contractor:
At Home Depot and Lowes it's essentially impossible to find a steel hand tool (hammer, saw, chisel, screwdriver, etc.) or electric tool that is NOT made in China, Taiwan, or Mexico. In addition, the quality of that foreign steel is clearly inferior, subject to fast oxidation (rusting) or actual fracture. Although the few American-made tools available are somewhat more expensive, those of us who want something to last buy American - IF you can find it. It's a sad state of affairs that we can't compete with the imports even though our production quality is far superior to foreign steel. Will the tariffs fix this? No clue.
Think it would be very helpful to address serious arguments if any, favoring the tariffs and suggesting trade war unlikely
Thanks
Perhaps voters bristle at supporting more trade agreements because they suspect that free trade works only when it boosts corporate profits. Voters see no push for free trade in many things they buy when freer trade threatens powerful lobbies.
How else to explain the total lack of free trade in legal drugs? Americans can't import legal drugs made by U.S. companies from Canada or anywhere else. Why? Because foreign governments negotiate with drug companies to lower prices for their citizens and free trade would let Americans benefit from those lower prices.
The same can be said for regional codes put on DVDs. They serve no other purpose than preventing Americans from using cheaper legally made DVDs from abroad.
Where was the free trade community when John Wiley & Sons sued Thai graduate student Supap Kirtsaeng, who used eBay to resell copies of the publisher's copyrighted books that his relatives first bought abroad at cut-rate prices? Do free traders support opening up the US market to cheaper foreign textbooks now?
Why are consumers' rights so often neglected in our trade negotiations, even when the negotiations are led by Democratic administrations?
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tariffs on imports from nations that are USA allies are going to be exempt. Will that include NZ as we are part of the Five Eyes Security collective? We're nuke free nation but still allies of the USA. How will they decide whom are allies of USA and who aren't?
What "exceptions" or "modifications" or new rules or regulations would you advocate to the current "free trade" regime?
What about "fair trade"? (I assume that currently our "free trade" is neither completely "free" nor "fair".)
Through the mists of time, I seem to remember that the argument for the benefits of free trade depends on the winners compensating the losers and then seeing if there is a net gain for society. Obviously, the compensation didn't take place. Hence Trump. What measures would you suggest, Prof. Krugman, to implement such a compensation?
I know that law is not your field, but since trump has, as I understand it, invoked national security to place these tariffs, what are the chances that the courts can strike them down, and who can legitimately challenge them.
"And as it happens, this topic is right up my alley. "
No it doesn't appear to be to. Your OP-ED pieces on NAFTA and the supposed benefit to some Rustbelt states show that you do no understand the full the dynamics involved. You quoted figures showing what was exported to Mexico. What you account for was he amount imported to states like Michigan in the form of finished goods. There were goods that at one time had been assembled by union labor (UAW) in Michigan. For 2016 the exports from Michigan to Mexico were 12 B USD, for imports the total was 46 B USD.
https://www.census.gov/foreign-trade/statistics/state/data/mi.html#ctry
https://www.census.gov/foreign-trade/statistics/state/data/imports/mi.html
With the Democratic Party's globalist outlook now part of liberal doctrine, does this mean liberals will stop making fun of folks who shop at Walmart? It seems those shoppers are just doing their globalist duty by purchasing underwear made in China.
Hopefully a simple one - do the tariffs apply to products containing finished steel (e.g. cars) or only the “raw” product? Also, I understand that the steel manufactured in canada uses iron imported from the USA - how is that factored in to the base in which the tariff is applied?
Are there tariffs that we currently impose for good reason and others imposed on us with similar justification and minimal ill effects? At what point and under what circumstances do limits on free trade become destructive and self-defeating?
I assume tariffs will lead to inflation. What is the endgame of this? If we have bubbles burst in this inflationary period, what does that look like?
The economics textbooks I use with my students (including the one authored by Krugman and his wife) state as fundamental that free trade allows economies to consume beyond their production possibilities frontier. In the debate over Trump’s tariffs, however, most of what I’ve heard involves specific industries and groups of workers. What about the millions of consumers? Don’t we stand to lose by the threat of tariff wars? How is this interest balanced against the others? Or are consumers too amorphous a group to bring political pressure to bear?
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Dr. Krugman - I have seen you several times say that VAT is not a barrier to trade, as it is imposed equally on domestically produced goods and services and on those imported.
That seems intuitive, but to define the question more precisely, don't we need to specify more carefully just what two tax regimes we are comparing? For example, countries impose income taxes on their domestic workers, but not on foreign workers, and that cost should filter through, at least in part, to the end purchaser, should it not? In other words, are income taxes NOT trade neutral, but anti-protectionist?
Thus, adding a VAT while leaving the income tax unchanged would not seem to be protectionist, but wouldn't replacing part of the income tax with a VAT be a protectionist move?
Question for Mr. Krugman: In your article "Oh, What a Trumpy Trade War!" (March 9, 2018), you argue that the "real goal" of international trade agreements is "to protect us from ourselves" by limiting the influence of domestic special interest groups on US trade policy. While trade agreements may function to limit domestic special interest groups seeking protectionism on the import side, it seems that other domestic special interest groups on the export side (namely, pharmaceutical companies, multinational banks, and multinational corporations interested in pursuing foreign markets) have been successful in lobbying to advance their own self-interested agendas for trade agreements to go beyond tariffs or other trade barriers and address matters such as intellectual property rights, health and safety regulations, etc. in developing countries under the facade of free trade. Do you believe that the US trade policy process has been captured by these other domestic special interest groups?
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Is it true that the Chinese government's protection for some of their industries helped China evolve into an economic power house? If so, why wouldn't some protectionism work for the U.S.? I understand that globalization has resulted in world-wide efficiency, but has the cost been too high for many in the U.S. with the dying towns in the "flyover states"? Isn't there any advantage anymore in being a maker of real, substantial things? For instance, I have heard that our national power grid is dependent on equipment mostly no longer made here. Maybe we should encourage that home-grown industry.
The United States has been running trade deficits for a long time (since the 80s i believe). Why is this not a bad thing? It does seem like countries that have surpluses - like Japan, Germany, and China appear to have a stronger industrial base than the United States. Is there any legitimacy to the concept that having a trade deficit is bad for a country?
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Hi Mr. Krugman,
I understand that free trade has been a net positive for the world. But it seems like it's been unquestionably bad for the American worker, and only marginally good for the American consumer. Since the U.S. government is supposed to serve the American people, not the people of the world, isn't there a case to be made that it's a dereliction of duty for our leaders to embrace these trade agreements?
1
Who is helped by these sorts of tariffs? How much can imposing tariffs do for our industries? And how much does this sort of action "unbalance" the global economy?
1
Why pick steel and aluminum for tariffs? Which countries account for most of our imports of these products? Will this really increase jobs or lead to a net loss of jobs as other countries retaliate? Why has the U.S. become so noncompetitive in these basic industries? They were pretty much gone in Pittsburgh in the early '60s when I was student there.
Trump's supporters in the steel industry dismiss the significance of China's 2% of US imports by talking about that country's over capacity and emphasizing the role of transhipments from other coumtries including Canada. Do we have the data on this? Can we say what proportion of Canada's exports to the US are comprised of products transhipmented from China? And would we be able to determine the breakdown between basic steel products (bars, flat rolled, etc), intermediate and finished products? It's unlikely that Trump would concern himself with such details. But his supporters will use these arguments to justify the return of tariffs on Canadian steel if the NAFTA discussions don't go his way.
If Trump's goal is to provide more manufacturing jobs in the U.S., which he promised his "base, then rather than imposing tariffs on steel and aluminum (with of all of its pitfalls and risks), what other options might accomplish bringing manufacturing jobs back home?
I would like to see more responsibility shifted to the corporations that take their jobs abroad. I am talking about using incentives and rewards for keeping corporate manufacturing jobs at home; absolutely no rewards for shifting American jobs abroad; and punishment or penalties for using cheap labor abroad then "importing" basically foreign made products back to this country to sell.
My meager understanding is that at the current time, there are rewards and lack of penalties for corporations doing what Apple does--design product in US, make it where there is cheap labor, and bring it back to this country by slithering through loopholes to avoid taxes or charges for "importing" a product made abroad.
Maybe the larger, more general question is: what would better than using tariffs to try to restore America's balance of trade and to keep American jobs at home?
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Working class US citizens should be very angry at Bill Clinton and the “Established Mainstream Politicians” who are controlled by their elite donors, the elite “DONOR CLASS” campaign contributors, and PACs (foreign and domestic) campaign contributors who paid these politicians to create all of the FREE TRADE laws that economically required that our US STEM manufacturing jobs relocate to foreign nations when US citizens will not agree to work for the same wages that Third World citizens are glad to work for.
2
My question:
Rather than other countries targeting specific U.S. products and industries (e.g., Harley Davidson, Oranges) as retaliation against the tariffs, might a more effective approach be for the rest of the world to stop providing ANY steel or aluminum to the U.S. until the tariffs were rescinded? This approach would essentially cutoff the supply of steel and aluminum that U.S. industry needs to manufacture many products and would seem to be a more direct International response to the new U.S. tariffs on steel and aluminum imports.
Will it be possible to craft a sensible tariff policy comprised of numerous individual exceptions applicable to specific countries and interest groups?
Okay, here are my questions:
1. You say that even if there is no retaliation by the EU (for example), tariffs to benefit a specific industry will hurt us. Can you explain how that works?
2. Won't tariffs help to create jobs in the US? Won't that bring back American manufacturing? And if not, then why not?
1
Steel and Aluminum Tariffs will help the USW union workers keep their jobs, but then make jobs for companies that use steel and aluminum relocate their manufacturing jobs to foreign nations where labor cost savings will offset the higher material costs that they will have in the USA.
Boeing comes to mind,
1
There are 16 times as many people employed in the US businesses that use steel as in the US businesses that make steel. Tariffs may benefit the steel manufacturers but if the cost of manufacturing with steel increases, those companies will have to spend more money on raw materials and have less for employees, and the costs of their products will increase, meaning fewer items sold, meaning less production, meaning fewer jobs. You don't have to be a Nobel winning economist to understand this one. (No disrespect, Paul, you're my guru)
1
How can US workers earn living wages and have our products be competitive with countries that don’t compensate workers with comparable wages?
Recently, Chinese officials have apparently floated the idea of selling US treasures as a form of retaliation for anti-China trade policies (see, e.g., http://www.scmp.com/business/money/article/2130587/economist-adds-voice-.... In 2010, referring to such threats, you wrote that "China has an unloaded water pistol pointed at our heads". Do you still believe that this is the case, or have circumstances changed over the past 7-8 years to make this threat more serious?
I grew up in small town USA (Warren, OH) and personally experienced the effects of the demise of the steel industry. Many jobs were lost as cheap steel flooded the US, preventing Republic Steel from being competitive (http://wkbn.com/2016/06/27/another-steel-industry-icon-to-be-demolished-....
My request to Mr. Krugman is basic:
Can you please provide a historical overview of trade tariffs in this country and provide facts on their effect? Did they work or not?
If trade tariffs are not the answer, what is the answer to competing against cheap government subsidized labor and industry?
I for one don’t miss the acrid smoke, toxins and pollution of my childhood riding past Republic Steel at 5:30am with my Dad on our way to a concrete construction job site. My Dad was a cement finisher and owned his own concrete construction business. I’d ask him to roll up the window to stop the choking air from coming into the truck. I was only 10 years old at the time, but the memory of those fiery blast furnaces streaming out plumes of poison will never go away. I realize they provided jobs to thousands of Warren, Ohio families when in operation. Those jobs then lost to China as it flooded the market with cheap and poor quality steel. I remember then seeing years later nearly new cars riddled with rusted side panels as the effect of a decision by GM, Ford, and Chrysler auto executives to use poor quality steel severely damaged our auto industry. So what’s the answer?
Howard
Hi Howard, I grew up in Youngstown so we're on the same page but the demise of our steel industry was multifaceted. Outdated plant and equipment, poor quality, poor management, union intransigence, total lack of environmental awareness and then strikes every three years until inventory was absorbed followed by meeting union demands and raising prices. The industry changed and the US didn't change thus becoming a higher cost producer with poorer quality and decreased productivity.
Dr. Krugman,
This forum should be informative. Below are several questions with context.
1) When the tariff plan was announced the week of March 1 the stock market lost substantial ground. Multiple experts from many sectors came out against this policy, including you, conservative Republicans, and captains of industry. The final plan exempted Mexico and Canada, pending NAFTA negotiations. As of today the stock market has recovered from its losses.
Q- Is the stock market a valid measure of the effects of Trump's tariff policy? If so, is the outlook not so bad?
2) Trump's primary justification for the authority to enact this policy is based on the idea that the lack of strong steel and aluminum industries is a national defense issue. Many, including you, argue that Trump's real motives are keeping his campaign promise to his base and combating bad deals. Assuming the defense argument is bogus, how can Trump be punished for abusing his power and/or breaking the law? Supreme Court challenge? Any chance of Republicans & Democrats uniting on veto-proof legislation to curb this policy?
3) U.S. firms have come up with innovative ways to revive other failing industries & segments of the economy (e.g.: fracking for oil, solar and wind for energy). Is it possible that the tariff policy may spur such innovation in the production of steel and aluminum, or in the creation of alternatives (plastics, etc.)?
I have more, but I will stop now. Thanks for considering these.
You have been writing about politics in the US far more than economics. I wish you would more to translate academic economics to political debates. How can democrats argue that protectionism in not the answer to the millions of blue collar workers who have lost their jobs over the past 30 years out so?
1
Trade aside, Paul,
Isn't restoring the progressive tax rates of old (reversing Reaganomics) the most critical issue of American social policy?
1
Not exactly on point but why do other countries use value added taxation and we do not? I read that it is to their benefit and no ours. Please explain how they benefit them and the impediments (except for Norquist and his acolytes) to the USA doing the same. Thank-you in advance
1
Prof. Krugman: What, and whom, is "The Economy" for?
What does this bode for FedEx?
One problem that is sometimes brought up regarding trade are its potential income/wealth distribution effects. My questions:
1) Does trade have a significant impact upon the capital share of income?
2) I'm pretty sure there are very good reasons to believe that trade acts to decrease wealth/income inequality between nations, but what impact does it have within nations?
3) If trade tends to exacerbate wealth/income inequality within nations, what are potential public policy responses that might mitigate or reverse this trend?
Are there any areas where you feel that US trade policy can be improved by being more restrictive? I am free trade leaning but there seems to be at least some facets of China’s trade policy that seems very one sided such as technology transfer requirements, developing nation status, intellectual property enforcement, etc.
Congratulations on the Nobel!
Could you please explain to everyone, including NYT journalists, the difference between "the U.S.economy", which all report is doing so well, and the "real, daily economy of Americans"?
It seems the stock exchange snd returns on investment for shareholders are doing well. Wealthy individuals and multi-nationals are sitting on tons of liquidity. That economy is doing well, and there is no "trickle down". involved. These wealthy players have recently received a huge tax reduction.
Then there's the economy of the poor and middle class. Wages have not kept pace with the cost of living since the '70's. The National Bureau of Labor Statistics gives us the ridiculously low number of 4% unemployment, BUT, their definition of "employed" is: if the person answering their monthly survey worked for at least 1 hour during the week of the survey, that person is considered employed.
That person may not have worked for 10 years prior, but caught an hour of work during the survey week, and they are considered employed. The NBLS has an unrealistically low threshold for "employment".
Their National Workforce Participation Rate I think is more reliable in reflecting unemployment. Why doesn't any one explain these realities?
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If our allies, Canadians, Mexicans, South Koreans, Europeans, etc. know that a trade war is bad for them, perhaps catastrophic, why would they retaliate with tariffs on US products? Wouldn't it be better to retaliate in some non tariff manner? Like not backing us in the UN; or refusing to participate/help in the US' various wars. Couldn't they seek to isolate us internationally? Instead of tariffs, couldn't our allies exclude the US from beneficial trade pacts - like what just happened with the TPP - US withdrew but the other nations went ahead without the US.
Please explain how these tariffs actually work? Do they really apply only to importation of raw steel and aluminum, or do they apply to imported products made with S & A? If they only apply to imported raw materials, why would that not discourage American production of goods made with those products, e.g., cars, washing machines, drink cans? If I can buy a Ford made in Mexico cheaper than a Ford made in Ohio with imported steel, why would I buy the American manufactured product? And if in fact the tariff impacts products made with the tariff-ed raw materials, how do we determine how much charge is paid on that product? I just don't see how this doesn't make either a manufacturing nightmare or a regulatory nightmare.
Hello Prof.
The benefits of comparative advantage bestowed by international trade are unquestionable. International trade is the key to the world economic development, and a peaceful coexistence of the world nations. Also, are there any effective policy measures that can be brought to bear on certain bad actors, who exploit the international system of free trade, by dumping their highly state subsidized goods in the world market?
The U.S., regarding trade, has nothing to offer the world. Our exports are corn-fed, hormone-filled beef, leading to children with breasts; GMO grain which use eventually leads to sterile land; snacks with palm oil, gotten from destroying palm habitat and endangered species; oil, also obtained by ravaging the environment, and harmful to clean air s nd water; high fructose corn syrup in beverages and most pre-packaged foods, leading to diabetes and obesity; cars, guns and machinery--these last 3 more expensive now due to tariffs.
Americans need living wage jobs in green technology, manufacturing solar panels, electric vehicles,
small smarthouses, organic farming and distribution, organic produce and meats and a good supply chain, and other normal, non-destructive work, like teaching or repairing robotics in automated plants and writing code.
There's an array of needed, non-harmful products and services the U.S. should trade. They're good investments and prepare us for the future.
As it stands now, the U.S. can trade various types of noxious products that have harmed people or the environment, and gives more progressive countries no reason to trade with us.
How can this dynamic be changed?
Why is the U.S. always called "the world's biggest economy", when for several years it's been the E.U.?
Since China has become a serious contender in trade, they are frequently first, with the E.U. second and the U.S. third. Sometimes the E.U. is in first place, but the U.S. is always third.
Why the mis-reporting, or am I missing something?
Question: Will the new tariffs affect the value of the dollar? I’m especially concerned with the value in relation to the Euro. Thanks!
If Trump violated US law, how will he be prosecuted, and can this dangerous initiative be reversed?
Professor Krugman,
Considering that Japan and China use formal and informal methods to prevent the sales of our goods there (& have for years), and considering that protectionism, not "free trade" has helped develop every 1st world nation (from Britain, to Japan, to South Korea, to the United States, which followed Hamilton's suggestions) , why are the tariffs bad? We have seen our industries (TV, radio, many other electronics) get hollowed out, and now we are seeing the same thing with steel and aluminum industries. Yes we may have to pay more for things made of those metals, but more things will be made here and our industries would be protected.Not only is this a good idea, but we should get out of NAFTA and end the WTO, which have only helped in hollowing out our industries. Yeh it's great if you're a banker and buy lot of things made in China on the cheap, but what if you're an American who used to work at a factory that made those things? We need industry again. A post-industrial nation is a stupid nation, one that will fail. One way to make things again is to end free and useless trade forever, and protect and help our industries. South Korean government directly helps it's companies, Japan used to have an entire department in the government set up to help it's industries, China has many state owned companies, and has indirect control of the other ones. We can continue to trade for resources sure, and other things we cannot create or cannot profitably create. Not this.
We in New England have watched industry after industry (textiles, timber, furniture, shoes, toys) leave for cheap labor elsewhere, especially the American Southeast. Many of the hulking structures have been "re-purposed" but many remain empty. Our economy has not collapsed because we invest in education. What can be done for those areas that have not been able to "move on"?
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No, not "whatever." Lying about the rationale for an action, for the express purpose of arrogating authority that otherwise you lack, doesn't make the action legal. That's what was found in the case of papering over the Muslim ban with talk of security and vetting issues.
So many who support the President point to unfair dumping of steel by China, yet we get so little steel from them. Since we import more from Canada then any other country, is all this just political posturing the President for the mid terms and 2020?
PRESIDENT TRUMP HAD BEEN OFF THE CHARTS ON UNFAIR TRADE FOR THE PAST 25 YEARS. WHAT POSSIBLY SET HIM OFF IN THE BUILDING INDUSTRY WHICH WAS THE PARENT OF THIS NONSENSE? WHAT POSSIBLE BASIS?
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What’s your opinion on this which MSNBC cited today?
Council on Foreign Relations, March 8 ---
“Trump Steel Tariffs Could Kill Up to 40,000 Auto Jobs, Equal to Nearly One-Third of Steel Workforce.”
“Employment in the U.S. auto industry will suffer from Trump’s tariffs to a vastly greater degree than it could possibly benefit in the U.S. steel industry.”
And...a crucial question: What were US tariffs like in the 50s thru 70s when the middle class, the working class and unions were strong? Pay and benefits rising. Jobs staying here. How did that work, Mr. Krugman.
That's the comparison we need now. ,
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My question for Paul Krugman. Could Trumps 25% tariff on steel work, if it were only on Chinese steel. Everyone agrees that they have too much capacity, and that they dump steel to keep their steel plants and people employed. Could the tarriff be aimed at just the biggest culprit? If no, what should we do about this problem?
You state that these tariffs are illegal...is anyone going to court to try to stop them?
1.) How has soooo much power accrued to the Presidency?
2.) Does Congress and the Senate get to vote on the implementation of the tariffs or on the bogus reasoning for them?
3.) Can’t the Judiciary put the implementation of tariffs on hold while they look into Trumps actual, provable, reasons for calling this a “national security threat”? Shouldn’t he have to explain that?....Return to question #1
No one is speaking to the question of Trump’s most trumpian truism-whatever it is, it doesn’t apply to him personally - in his “America First” approach. Whether it’s use of Chinese steel https://aflcio.org/2016/10/12/six-facts-donald-trumps-use-chinese-steel
or the crazy contradition of Trump-branded products made overseas vs. made in America. Hope you can bring this forward.
If NAFTA was all about trade creation, then you could say anything outside of it is trade diversion.
I'd be interested in your response to the Daniel McCarthy's OpEd piece today, "The Case for Tariffs."
Why is it called FREE TRADE and should it be?
Please explain your understanding of the big picture on trade deficits, the bad deal for the US that Trump cites. Thanks
Greetings from Canada (the NYT's largest export market!)
It's been 25 years since your article in Foreign Policy, "The Uncomfortable Truth about NAFTA: It's Foreign Policy, Stupid." Looking back, how well do you think your views in that article on NAFTA have held up and how has your thinking evolved?
My impression was that the focus (in your article) was primarily about US trade policy towards Mexico and didn't really deal with Canada. What do you see as the tradeoffs in (re-)negotiating a NAFTA deal as opposed to bilateral deals between the countries?
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Question: In your opinion, what is the most effective way to compensate those who loose from trade in the U.S.?
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What is the opposite of a Globalist?
How can one person have so much power to destroy the planet
Even my non-economist self knows Wilbur Ross's soup can explanation justifying this tariff decision is misleading and, well, insultingly dumb. Can you please walk us through just how misleading the "soup-can model" actually is?
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If I can give a layman's head start on Krugman's answer, Wilbur Ross was misleading because he used examples for which the value of the metal was quite small compared to the overall price of the product. Did you notice that he did not hold up a U.S.-made washing machine, a steel filing cabinet, a Chevrolet truck, a Caterpillar tractor, a high-rise office building, or the Verrazano Narrows bridge?
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That sounds right, Bruce. Thanks. I subsequently read a news item that mentioned the tariff's effect on one of my favorite industries: craft brewing. Not only will the price rise on millions of ol' Wilbur's favorite props--cans--but also more harmfully on the large steel vats that brewers use to make their lovely product. Guess I'll have to stock up quickly. ;~>
As much as the rational, rules-based, scientific approach to trade policy is desirable, ultimately an element of trust is necessary for the system to work properly. But it’s not formalised very well in such frameworks, and is often left out of ‘serious’ policy discussions, leaving them mostly irrelevant.
With greed having gotten the better of trust on almost every front, the system has left aside large parts of the population. The 2 major US parties have let down their publics and likewise, the private sector has put consumers and employees in the back seat, while large shareholders take priority in corporate decision-making. Expected benefits have not made their way back to these other groups. Unless the ‘trust’ aspect can be addressed, all the expertise in the world will not help get beyond underlying reasons for issues involving trade, or Trump.
Could economists not adapt theory to focus more on the ways that rules-based frameworks, such as international trade, and democracy in general, are undermined by the lack of ’trust’, or responsibility, needed to make things work? This is not only a question of special interests acting in bad faith, but of a cultural void which has left us without the social structures necessary to function correctly. It seems that your arguments in favour of rules-based frameworks, as an antidote to special interests, ring hollow when those in power are not trusted to use them the way they were promoted.
What of Wilbur Ross and his can of soup?
Besides retaliatory tariffs, might there also be retaliatory boycotts of American goods by the citizens of foreign countries?
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"Trump Administration Waives Punishment For Convicted Banks, Including Deutsche — Which Trump Owes Millions", was the title of the article printed in the International Business Times on 1/09/2018. Can you explain how this policy helps ordinary U.S. citizens like me?
If Trump's tariffs violate U.S. law, as you suggest in your article, how likely will courts intervene and strike them down?
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Is there any way to bring back more manufacturing jobs to the US? What do you think would be effective?
China sends us cheap goods and accepts paper dollars backed up by our good will. Eventually they have to spend these dollars or buy US dept obligations. Why is that bad for the USA? Won't the dollar value drop at some point which will make US goods more competitive? Isn't Trump confusing the trade balance with a profit loss balance sheet?
Is there any validity to the idea that trade agreements generally/ steel agreements specifically are unfair to us? The president of the steel workers union, who is in favor of Trump's tariffs, stated on TV that US's 600 billion dollar trade deficit amounts to an unfair transfer of wealth. And regarding steel, he talked about how the US is cheated by China, Russia, South Vietnam and India.
When I shop I generally look for the best “deal”. If I can get something more cheaply somewhere else I generally will. I consider this a “win”.
If a country is willing to sell us raw materials at a discount why aren’t we “winning”. It seems like Trump has turned everything upside down.
Yes it makes it harder on steel producers if Canada can produce it for less but isn’t it better for America?
Thank you for a cogent history of our free trade history.
But isn't there a critical difference between free trade with democracies that have (at least) our human rights protections and social welfare benefits, and those that are freely exploiting child labor and keeping unions out of the workplace at gunpoint?
Can there be any moral value to the trade tariffs? It's always bothered me that one reason imported materials are cheaper than domestic ones is the laborers producing them in other countries are paid so little in wages and benefits. It seems to me that whereas we used to import the slaves, we now import the slaves' labor: the root exploitation is the same. If "leveling the playing field" results in higher consumer prices but a more egalitarian world is that a bad thing?
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I've heard we have a trade surplus with many countries when it comes to service. what comprises the service field
I haven't seen any comment on the timing of this move, which is coming days before a special election in a heavy steel producing district near Pittsburgh. As crazy as it seems that this would drive our global trade policy, what do you think?
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Here's my opinion and please correct me if I am wrong. With the trade tariffs, as with many things Trump does, it seems more bluster than reality. As of The Q3 of 2017 Report from trade.gov shows, China doesn't even make the top ten producers of our imported steel. Makes for good China bashing though. This is reminiscent of Trumps purported love of Appalachian Coal Miners. It plays well with his base, but even without renewables, Appalachia competes with other parts of the country where coal can be mined cheaply. Is this not just Trump making bigger claims than the reality of what he does.
Oops - "currently manipulation" was supposed to be "currency manipulation."
Paul, please talk about the new Trans-Pacific Partnership and how the US will lose because of our non-participation.
How would you reply to Daniel McCarthy's The Case for Trump’s Tariffs and ‘America First’ Economics? Thanks!
Pres. Trump is not a true believer in any political,or economic theory. This self-proclaimed genius does not follow anyone's advise but relies on his substantial gut to make uniformed decisions. Could there be some method to his madness over the tariff issue? Could it be that Trump will exempt Japan, Korea and our European allies from the steel and aliumimum tariffs and impose the tariffs only on China and other bad actors?
Is it possible, after Trump leaves office (by whatever avenue) to undo the damage he's done, to the environment, trade, economic policy, taxes and so on? Is this easy or hard to do?
Or is it a fantasy to believe that we can easily undo all of Trump's damage? If we can't undo the damage, then what?
Setting aside the president's nonexistant reasoning for imposing tariffs, one of their legitimate uses is to prevent trade partners from becoming pollution havens. This is a plausible legitimate reason to impose tariffs on say, Brazilian steel.
What is our current level of understanding of the extent to which trade partners like China, Brazil and Mexico are pollution havens? How does that affect U.S. employment and the global environment?
After asking my question, I found this NBER paper:
https://www.nber.org/papers/w22636
Section 4.4 - "Empirical Evidence" on page 30 seems to sum it up:
"The literature providing micro-level evidence on international trade and the environment is still in its infancy."
How can this be? 45 years after the advent of the EPA and 24 years after NAFTA and we still have no idea on this?
OK, I understand that free trade-in, at least in theoryin theory and under some circumstances can increase the total wealth of both trading partners. But that does not mean that all classes in each of them benefit equally. The "A rising tide lifts all ships" metaphor sounds pleasant but has no basis in economic reality. What really hap[ppens depends on the relative political power of the classes in each country. That of the working classes in most countries around the Pacific is woefully weak. Somewhere between zero and non-existent. And while the working class of the U.S. and other democratic countries certainly have more political power than those of poor - and always undemocratic - poor countries, that power ain't what it used to be. Hence some skepticism about free trade and globalization. It's not just Trumpian ignorance. I think there's real problem here.
What do you think?
So the steel workers across the river in Granite City, IL will be going back to work to decent paying jobs. These aren't Amazon part time "lack of fulfillment" jobs.
Why is this a bad thing for our economy? Seems like a no-brainer from where I'm sitting here in the midwest.
Thank you,
Brian
Can you explain from the perspective of the (non-administration) men and women standing around President Trump as he signed the order, their point of view? Why are they are cheering? Why are they at the White House?
If these tariffs lead to retaliation from U.S. allies and trading partners, will the “tit-for-tat” exchange between developed nations lead to a Recession as prices rises and corporations cut positions to protect profits?
My basic understanding is that there is a correlation between tariffs and slow economic growth because tariffs overburden the supply chain off from meeting the demand for raw materials. Without the necessary resources to meet demands, cuts are made to jobs to protect profits.
Is the argument that our trading partners are “cheating” the global trade system true? Or is this just a reality that is happening in China?
I understand that the US should aim at reinforcing the middle class by innovation and creating new "industries", but the government often places some measures of protectionism for other sectors of the US economy in the context of trade deals. So why not steel?
The article below, made me think, especially about the Philosophy behind some modicum of protectionism. It seems to make some sense to me.
Thanks for the attention.
https://www.nytimes.com/2018/03/08/opinion/trump-tariffs-economics.html?...®ion=opinion-c-col-right-region&WT.nav=opinion-c-col-right-region
Any way for U.S. to use trade war potential in upcoming talks between US and NK as a more effective means of leverage than sanctions have so far worked?
Could you please explain the ISPs of trade agreements like the TPP? I’m tired of the hysteria on the left about corporations being able to sue countries for environmental regulations, or losing profits, or ....
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QUESTION(S):
What good examples are there from other countries for successful programs, government or otherwise, to assist the "losers" from globalization whose low-skilled jobs have moved to low-wage countries due to their comparative advantage?
What prescriptions do you have for what might work in our country? Free community colleges? Guaranteed living wage? High-tech training programs?
Is it realistic to expect, say, a 50-year old layed off by globalization or automation to find work at comparable past salary after taking advantage of such policies or programs?
Dr. Krugman - As a liberal that does his best to keep informed on important issues, I am - like many of my friends - relatively ignorant of the nuances of global trade. Over my lifetime I have watched a number of our industries decay into part of the Rust Belt for one reason or another - usually blamed on much cheaper foreign labor, which in turn suggests that unions demanding higher pay drove these industries beyond our borders. The quick solution to clueless people such as myself, would seem to be may foreign steel more expensive to offset the costs of our labor. So - after that long into - is any of that actually true? Did high labor costs really drive our industries offshore? If not, what? Would it be a good idea to bring any of them back, and if so, what would make that happen? Or would it be better to become the world experts in some advanced industries such as green power (solar, wind, etc) that WE can export to help our trade imbalance? I founded and am the CTO of a business to business software company, but I would love to see this country actually manufacture things again.
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1) If country B has a comparative advantage in production of food, should country A pave over its farms and rely on B?
2) If country X makes a product that is cheaper, but exploits labour, and may be defective & dangerous cause there's no Quality Control, does it still have a "comparative advantage" ?
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Tell me it ain't so ...
What do smart market manipulators gain from tariffs?
I see a closed economy costing the vast majority of workers and retirees more expensive goods. Comparable increases in wages will cause inflation as money chases a limited supply of goods. The retiree with no COLA for savings or retirement plan will suffer a lowered living condition. Social Security with a COLA will either be cut back, or turned into a "Grant" system to afford government control of run-away inflation.
The dollar will stop being an international currency and then lose much of the current stability and value in international markets, thus feeding economic nationalism (isolationism). Numerous "dollar" nations will trade in their dollars for other currencies thus making the dollar buy less. Oil will then cost $500/barrel. (USA production of oil will be insufficient and coal will become a requirement for energy). Etc.
Smart market manipulators will buy into stable economies like Europe and China. No one will trade with the USA except on a stable currency basis, no longer the dollar.
1) Has the US actually negotiated poorly in any of its trade agreements?
2) What changes would you make to any existing trade agreement if you could?
I have been following this issue. And I get that most Republicans are against this imposed tariff. But what about the Democrats. Some of them seem to be in favor of Trump's move. Can you explain why?
Questions:
1. I think that economists are confident that trade between two nations increases the average wealth of both. Can you comment about the winners and losers (if any) within each nation?
2. Are there cases in which the US has sacrificed the job security of some of its citizens to pursue other goals, e.g. national security?
3. Is there an economic argument or theory that supports the notion that American workers should earn more than their foreign counterparts with comparable levels of skill, training and intelligence? Is there a policy that would achieve this goal over the long term?
Two questions:
1) if a foreign nation is willing to provide a good for pieces of paper (money) that it elects not to use to obtain goods from us should we care?
2) please discuss the trade deficit-we buy more goods from them then they buy from us. Where does the difference go? What share is spent on purchase of US govt debate obligations? What happens to the cost of servicing the federal debt (and private investment in plant and equipment) if we did not have a trade? imbalance?
Would you respond directly to Wilbur Ross's downplaying of the effects of these tariffs on prices in the U.S.? Is he correct when he says, "In a can of Campbell's Soup, there are about 2.6 pennies worth of steel. So if that goes up by 25 percent, that's about six-tenths of 1 cent on the price on a can of Campbell's Soup," and that the cost of car would not be affected much. What other effects might he be leaving out?
The loophole that permits Trump to impose tariffs without congressional oversight or review requires a finding of a national security threat. Since that loophole arises from a law (passed by congress and signed by a previous president), why isn't there a lawsuit challenging the finding?
"Teacher, I have a question for you", actually two:
1- What rationale is there for so-called "economic nationalists" for whom Trump is the Champion they had been waiting for that the tariff surcharge is just a way to offset the unfairness of American exports paying a much higher VAT in the European Union than the equivalent kind of- US tribute, the states or even towns- determined sales tax paid on imports from Europe when they change hands.
This is the argument I heard , curiously from a non-American PhD candidate very fond of "Professor" Trump -that would have been reason enough for me to dismiss this thought as a one more bogus, that iis Trumpy claim. But I want to engage in arguments -what I told the guy, in some awe because is is already somehow ahead of my academic achievements is that n sir, the VAT does not discriminate against Made-in-USA goods and services for both American and not. Any thoughts
_a disgression: we both , the PhD candidate and myself ended up engaging in a spirited exchange to ameliorate the frustration of not having being able to get into your seminar last Tuesday because the Grad School administrators' utter disregard of the notion of rational expectations. Quite a few fellows were turned off.
2- What is the true European leverage to bargain heir way out of the attack of the Donald, or for hat matter Mexico's and Canada's?
Today we see some of the 100,000 Brazilian steelworkers protesting outside the US consulate in Rio about these tariffs. The second greatest amount of US imported steel comes from Brazil. But there is more...The US sells coal to Brazil used to make that steel. Brazil is looking for a new supplier of coal. So Brazil will raise tariffs against the US and stop buying our coal. How does this help us? How will a successor to Trump unwind this mess as it replicates across the globe?
Senator McCain gave some compelling arguements why the tariffs are not needed for national security and may actually hurt the Military. Can Congress/the Courts follow up on this?
Also, how will the tariffs impact the amount of shelf-stable food in the proposed "Harvest Boxes" for SNAP recipients? You can't eat empty boxes :(
It seems to be commonly agreed that certain US trading partners (China) pirate our intellectual property. Is there any way that we can use trade policy to address this?
Instead of tariffs just require the entities selling to the US market to meet all US labor, safety and pollution laws?
Hi Professor Krugman. My question is not about tariffs, but about a much larger question: Why can't we in the United States pursue industrial policy like our allies do? Germany leads the world in exports of high end manufactured goods (cars, printing presses, industrial presses and dies, truck cranes, etc.), and they attribute that to a decades long attention to industrial policy (also known back in the day as the "mixed economy). Aside from the American corporate decree that the best industrial policy is no industrial policy (a quote from a recent EU study), why can't we do what Germany does? It would not happen overnight, but why can't we have a big public discussion about this and start the process?
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1. Kuttner in today's American Prospect argues that Smoot Hawley had little effect, that it was the Depression and drop in purchasing power that caused the trade slump. Do you buy this?
2. Given global supply chains, do Ricardian theories of comparative advantage mean anything if virtually every produce traded is a composite of producers in many different locations?
3. As a number of commenters have inquired, what is the bearing of subsidies, tax incentives, intellectual property protection, etc. on the calculations of trade advantages and disadvantages? Can their effect even be calculated?
I recall that when NAFTA was adopted during the Clinton administration, there was recognition that some US jobs (presumably low-skill and low-wage) would be lost and that the displaced workers would need retraining, and that a program would be put in place to accomplish this. What happened to that program and what if anything did it accomplish?
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Mu question is related to trade in the sense that tariffs are inherently inflationary. With the US economy currently at full employment, albeit job distribution is uneven, and wages starting to rise (finally!), the tariffs will increase the cost of numerous goods, even if it is a few pennies, across the entire economy, that is a lot. The Fed is already increasing interest rates to keep the economy from over-heating. Can you explain why the interest rate increases are not inherently inflationary? I understand the economic model where, holding everything else constant, interest rate increases would reduce borrowing by businesses, slowing the expansion of the economy, as well as reduce spending by consumers on large ticket items. But everything else is not constant. The tariffs will significantly impact the automotive industry, likely exporting many of those jobs to avoid the tariffs. Can you explain how this is not going to lead to another recession/depression?
Isn't the real issue trade imbalances due to many asymmetrical structural conditions (some impractical or impossible to change) that ultimately yield winner take all failure scenarios? What's the economic theory that makes this free market path preferable? Do you feel current economic theory adequately factors in deeply serious social ramifications in it's analysis?
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I assume that the US doesn't come to the Trade/Protectionism/Subsidizing argument with clean hands since we have agricultural price supports, corporate bailouts and myriad Federal, State and local programs that provide subsidies to corporations. Can economists quantify what the net effect of US internal subsidies has on our balance of payments or on our trading partners strategies for protecting themselves against our subsidized goods and services?
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Is most steel and aluminum used in the U.S. domestically produced or is it imported? Are U.S. job loss due to less domestic production or increased automation? Do U.S. steel and aluminum firms use imported metals as raw materials for specialty products and if so will the tariffs result in more blue collar jobs lost than competition from imports? If Canada is responsible for most aluminum and steel exports to the U.S. then how do they produce it cheaper than domestic producers (I assume Canada has similar labor and environmental regulation)? And last, due we export raw materials to Canada (i.e. ore) and export finished steel and aluminum products to Canada such that the tariffs will result in a net loss of jobs in these industries?
OK, so there's a standard story about the domestic foundation of US international supremacy that professors of International Relations have been repeating in their introductory classes for 50 years or more. It says that the RTAA, by radically diminishing/eliminating the Congressional conflict over foreign economic policy, created the foundation on which successive presidents could use US economic and military power to institutionalize first a Western and then a universal "system" that provide various international/global collective goods, while also assuring that the US goverment maintains its dominant international role. Does the Trumpy trade policy signal the return of conflict over foreign economic policy as a central preoccupation of Congress? If so, does that mean the end of this postwar "system"?
I'd love to understand why the trade balance with other countries is not a zero-sum game. How can a country go on year after year with a trade deficit? Doesn't it have to balance out at some point? It seems that we need to understand this very basic point before we go on to address the current policy decisions, especially as policy makers themselves don't agree even on this.
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I'd like to see clarification of the "intellectual property" aspects of trade deals. E.g. the TPP appeared to give away a lot of "fair use" rights, appeared to support the continuous extension of ever-longer copyrights, etc. What's going on with that, and is there any way to reasonably balance competing needs in this arena?
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Not many have written about the inflationary impact of the tariffs. With the low employment rate, wouldn't price increases increase the rate of inflation? If so, could it have a significant adverse impact on the economy?
I'd like some clarification of the investor-state dispute settlement process in various trade deals. I've been concerned that these processes favor corporations over local communities, workers and the environment by allowing a panel of corporations to decide if a law or ordinence harms the corporation's future profits.
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The U.S. is the only major nation that has failed to convert to the metric system. What effect has the resistance to U.S. metric conversion had on our trading relationships, educational system and ability to compete internationally?
Dr. Krugman,
It's been proposed that in an effort to maintain low obstructions to trade, nations may respond by purchasing less US debt instead enacting significant tariffs of their own. How likely is that to happen? What might be the long term effect, given recently passed tax legislation and reduced domestic spending proposals?
Trump's idea of "winning" seems that US has trade surplus with every single trading partner. that could be achievable if the US economy shrinks substantially and no one wants to buy US Treasury bond. How much of a contraction of GDP is necessary to attain that "trade surplus with every single trading partner"?
Prof. Krugman, you've opened a virtual Pandora's box by asking for questions. There are many good ones here, from the exemtions to Canada and Mexico, the benefit or lack thereof to plans resulting in more automation as automation is the name of the game in the future, and other questions of tariffs from EU and other organizations/multi-nation outfits. As the world becomes increasingly connected, the tension seems to urge breaking in as many pieces/directions as possible as in the original Panglossia, if that's what it was called. Yes, I fear the unraveling you wrote aout in the first graf: the whole global trade system built, largely under UT leadership, over the past 80 years could unwind.
I have recently been surprised to learn that there are asymmetric trade deals between countries in the World Trade Organization. For example, many other countries apply a higher tariff on cars from the US than the US applies to cars from these same countries. Why should this be? I don't know if I am more surprised when the other countries are European (so similar to the US in terms of maturity and prosperity) or China (obviously different from the US, but lower wages and laxer environmental restrictions would seem to already give exporters in these countries an advantage). Moreover, since most other countries have a value added tax but the US does not, this difference seems to be an additional benefit to other countries' exporters at the expense of US exporters.
Currently, Europe imposes a 10 percent tariff on cars imported from the U.S. while we impose only a 2.5 percent tariff on European cars. Negotiating a comprehensive trade agreement a la NAFTA is no doubt extremely complex, However, equalizing our automobile tariffs to the level imposed by European nations would seem to be relatively "low hanging fruit". This would seem to help U.S.carmakers and/or consumers with no obvious (to me) downsides. What am I missing?
2
There has been a lot of good reporting on potential fallout/reaction to the tariffs. An interesting one involves Brazil as a major exporter of steel to the US. However, Brazil also imports a lot of US coal to make that steel. How do you think POTUS will rationalize probable reduced coal exports as a result of the tariff action?
Do any current trade deals support "fair trade," which would include such measures as requiring living wages and benefits, adherence to environmental standards and penalties for government subsidies?
3
Dr. Krugman, you can tell us "if Trump does X, under set of conditions Y, then result(s) Z is/are likely", and I would trust your analysis. But that assumes that Trump acts consistently enough to say that he actually has a policy, or even that he has done X when what I suspect as that it's going to be very difficult to tell what he has done, because he'll continue to contradict himself constantly. Given that on the subject of tariffs he seems reluctant to take anyone else's advice, perhaps the most realistic question is, what do you think is likely to happen here and around the world and in their interaction in a situation where no action is permanent, perhaps even in the short run, and no such thing as policy exists? Do you think that at some point Trump will get bored with the subject, declare victory and obsess about something else?
2
If our allies in Europe, Canada, Mexico and Asia move forward with their own trade agreement, as they appear to be doing, to what degree will they still be impacted by the absence of the United States?
With our current policies, does the USA become minimally important, despite being such a large market? Thanks.
1
So, if these tariffs are supposed make our steel and aluminum makers more robust for employment, what will their impact be given the increasing specialization in these industries and the need for technology up-grades for many of these aging mills to be competitive?
2
I'm perplexed on why Canada and Europe seem to have viable steel and aluminum industries and the US does not. I thought that the reason other countries were able to undercut products made in the US was that they paid their workers poorly or had lax environmental regulations or the industries were subsidized by the government. If that was happening, I can see why their aluminum and steel would be cheaper, but don't our trade pacts preclude Canada and Europe from taking such an unfair advantage? If Canada and Europe have figured out a way to make maintain competitive aluminum and steel industries, why can't the US?
3
In addition to jeopardizing jobs, trade deals like the TPP contain provisions that pose risks to health and the environment, such as the extension of patent protections for pharmaceuticals and the Investor State Dispute Settlement, which allows corporations to sue governments in special tribunals over regulations and to hold taxpayers liable. Can deals be designed that preserve the benefits of trade while not putting jobs, communities, health, the environment, taxpayers, and national sovereignty in harm's way?
3
See my question — I’m tired of things like this. Dr Krugman, can you please explain ISPs? And perhaps mention other extraterritorial judicial bodies like the International Whaling Commission, the International Criminal Court, and others... and that intellectual property protection, in Asia(!), is important to writers, musicians, tech developers, inventors; that the drug issue is real but that there are some workarounds (the clinton foundation, for instance, has helped poorer countries negotiate on pharmaceutical prices on HIV drugs); that enforcement provisions for CITES (in Asia!) is actually an environmental plus in the TPP...
1
My first thought on seeing the size of the Trump steel tariff was why such a large tariff. I attempted to discover the size of the current tariff on steel to assess the degree of increase. What I found on the government website is a link to a very complex schedule that requires expertise to translate. What I also found is that "steel" is no a simple product for tariff purposes. The schedule treats steel differently depending on its chemical composition. What is listed as simply "steel" would appear to be the material used for building construction. The alloys used for making instruments, tools, etc. are separate categories that often but not always subject to the same tariff rates. Moreover, it is unclear to me how the existing tariff rates compare with the 25% rate the President announced. Thus, is it even possible at this stage to know the potential impact of the change being cheered by the pictured steelworkers? Are some of them or many of them employed at jobs or formerly employed at jobs that will not be touched by the Trump tariff?
4
Economists only have so many variables in their toolboxes and, as a result, they over-emphasize things that they can quantify and stay silent on things that can’t be measured. It turns out that the aspects of trade that can’t be translated into a digit might even be more important than those that can. What number do we assign to the destruction of a previously healthy and vibrant community when a plant shuts down? The people who lose their jobs aren’t just employees at the plant, but also the local baker, the barber, the employees at the grocery store and so on. The effects ripple through their family members as well. Economists can’t possibly adequately take these devastating effects into account.
3
Is there an option that could be called "fair trade" that is intermediate between unrestricted free trade and universal protectionism?
Does free trade really benefit everyone or are there different impacts for different classes? Are you really better off if you lose you job at a semi-conductor factory if you can buy a cheaper flat screen TV. Discuss with reference to Stolper-Samuelson results.
2
Why has free trade been intimately linked with austerity policies in most of its recent manifestations. What is the historic link between free trade and sound money?
2
I would like to know why did the stock market go up after the announcement of the raise in tariffs?
Thank you.
2
The highest margins in the metals business is in fabricated products which also drives innovation in all of this sector’s inputs. Their raw materials inputs are going up. Do the tariffs include imported fabricated metals products? If not, it looks like a benefit to foreign fabricators.
1
Does our not having a value added tax cause us to have a trade disadvantage with nations that do use this form of taxation?
Shouldn't trade policy be founded on several basic principles such as:
1. Prevent exploitation of labor and the environment.
2. Cancel out government subsidies.
3. Cancel out currency manipulation.
Otherwise, other competitive advantages are allowed?
Will this disruption in global trade policies help Russia - directly or indirectly?
1
Isn't the potential job loss in other industries way more than saving a few jobs in aluminium and steel?
2
exactly. If I am a big user of steel or aluminum (think auto makers and airplane manufactures), I move more production and employment to countries that have no tariffs (think CN and MX). And, of course, no tariffs on the finished goods which contain the steel and aluminum. The administration might then extend tariffs to finished goods based on their steel and aluminum content---then the real trade war starts with retaliation on our exports (think agriculture).
1
What specific impacts do you foresee for developing countries due to these measures?
Will this not erode confidence over WTO?
I see a possible benefit for a handful of workers in metals - in automation equipment system management, not shop floor workers. IF there is investment in added capacity I see a benefit for automation sales. Automation tech producers are unlikely to add any additional workers for this relatively small amount of sales in their global revenue terms. Against these tiny gains in employment I see a significant impact across all industries in the American economy that will be realized in increased prices and job losses. We risk having more producers of fabricated products moving out. Trump appears to be reinforcing his base in narrow geographies at the expense of American industry and consumers. BAD.
No one should believe Trump when he says the world is taking advantage of the US and laughing at us, but there is usually a kernel of truth found somewhere whenever he spouts off. So while the claim that we must throw up protectionist tariffs against friend and foe alike is ludicrous, what are the areas where there really is an imbalance, where the US actually is operating at a disadvantage to trading partners?
1
Excellent question!
I would be interested in a general response from you to Daniel Mc Carthy’s op-ed piece today. I am not sure I agree with him but not sure why. He was thoughtful and reasoned.
Looking backwards for lessons from past trade policies (e.g., Smoot-Hawley) is instructive, but is it predictive? My question is: what is the state of play on the real, current global economy chess board, and what policy tools can actually be effective today? It seems to me we’re now in an era where individual nations (and even trade blocks) are limited in their ability to regulate global trade by the constraints on their jurisdictional spheres of influence. Meanwhile, multinational corporations have virtually unlimited scope to “play the field” globally, moving their financial, human, and physical resources wherever it suits their profit interests. Not only does the non-governmental sector have a great deal of legal freedom to pick and choose where and how to deploy resources, corporations and industry alliances thereby also have tremendous negotiating power when seeking the government-regulated sanctions they need to execute their business plans. I would argue that we are already seeing a corrupting result of this power shift: a blurring of lines between the public sector and the private sector that calls into question who is really in control of regulations and crafting trade policy. In today’s global economic environment, then, is trade still even governable by the “guardian sector”? Or is it now in a process of Darwinian-style evolution, where the strong, the smart, and the swift survive, and “trade policy” is on its way to becoming to a public relations exercise?
1
If imposing tariffs is stupid and self-destructive, making only your own population poorer, then WHY will the EU and other nations respond to Trump's tariffs by imposing retaliatory tariffs? It sounds like cutting off your nose to spite your face.
The NYT reported in one of its articles this week (reporting on errors in Trump’s trade arguments) that the U.S. had a trade SURPLUS with Canada. I know Canada makes that argument. Do you agree with it, and why? (Can it really be that the U.S. is initiating a tariff skirmish and threatening a trade agreement with a country with which it has a trade SURPLUS???)
Would you please comment on Daniel McCarthy's March 8, 2018, NYT Op Ed piece?
1
What do you think of Daniel McCarthy s column today?
1
Please explain if there is a connection to Deripaska’s “Aluminum Wars” and the tariff on aluminum by DJT. https://www.europeanceo.com/profiles/oleg-deripaska-and-the-russian-alum...
Please analyze Peter Narvarro’s position on trade policy and why you agree or disagree. Thankyou
1
Question??
If the tariffs imposed by Tump are bogus - can they be challenged in court??
Thanks,
ReV
1
https://www.mtholyoke.edu/acad/intrel/interwar/keynes.htm
Are Trump's tariffs vindication of Dani Rodrik's trilemma?
Isn't this tariff thing another Trump con?
There are EXEMPTIONS for the tariffs.....for instance, if the specialty steel cannot be supplied from the US in the quantity required, or for "national security", big corporations are having their lawyers prepare to apply. Little guys may get hurt, as usual with the GOP, but for the big boys business as usual.
Another signing ceremony/con like the Carrier jobs, the Opioid Emergency, the televised Gun Summit..? Once Trump gets evetyone scared and amazed at his audaciousness, he gets a MAGA win and moves on to another Reality Show gambit.
2
Why are congressional Republicans, Wall Street, and you the most ardent opposition to tariffs?
What could Congress do to prevent this from occurring?
1
Is Russia helped by Trump interfering with free trade?
1
Paul, my view is that the US has been importing deflation (mainly from China) for the last 30 years and exporting inflation to the rest of the world through its ever increasing amount of dollars issued to finance its permanent deficits.
If this scenario is in fact right, as I think it is, then my question is why would the US want to impose tariffs to imports and run the risk of killing this hen that lays the golden eggs?
Q: What is the correct way of addressing the illegal government subsidizing of export industries that certain countries practice ? Could tariffs be considered a justified instrument of leverage in such cases ? Here is an example: http://www.boeing.com/company/key-orgs/government-operations/wto.page
I'm curious how you think a trade war will play out in the context of many of the US's trading partners are members of trade agreements among themselves that the USA has declined to join (like the Trans Pacific Partnership)? If the USA thinks it can just dictate trading rules won't most countries just direct their trade elsewhere? I say this in a context where American industries again and again have tried to violate trade agreements in place to restrict imports. The decades of America imposing tariffs to support their softwood lumber industry that have been ruled by international tribunals to be illegal again and again. Canada has started turning to other markets. Why deal with - um - sleazebags? (Pardon my french.)
1
Wouldn't it be cheaper, safer and saner to just pay off Trump and his family? Just give them money to shut up and go away? Could Pence be worse? Would the Cabinet go with Trump in the same deal ? Could you Paul Krugman make the pitch? --Matthew Rose / Paris, France
2
Dr Krugman. Many people on Mexico believe NAFTA is going to end. I have 2 particular questions:
1) What is the general feeling in the US with the NAFTA negotiations? Is there a perception that NAFTA could come to its end?
2) I´m sure Trump will finish imposing those tariffs to Mexico to. How would they affect Mexico?
1
Long before President Trump, numerous apparently rational economists and international corporations have complained that China uses slanted regulations to effectively limit opportunities for foreign companies in many sectors of its economy and that it has a continuing history of violating intellectual property rights and attempting to steal high technology secrets. All these long time policies would appear to be factors in our ever expanding colossal trade deficits with China. I've noticed in your recent columns lambasting Trump's trade actions, you don't discuss Chinese protectionism. Is that because you think they don't really exist or matter?
1
An economist professor friend once told me that we would be better off if all trade restrictions were abandoned and goods were allowed to flow freely. Like most ideas, I suppose this is not true in all instances, but it does make lots of sense. I would like to hear your opinion of the circumstances under which trade restrictions make the most sense.
Why is the national security argument in defense of tariffs “obviously bogus” as you state in your op-ed? A piece arguing in support of the tariffs in today’s paper states, in part, that the US needs a robust domestic steel industry in the event that the country partakes in a major war. Is that point incorrect, or would the US have sufficient steel manufacturing capabilities even without the tariffs?
A related, but not-exactly-a-trade question: how are remittances related to trade imbalances? The US has a lot of legal and illegal immigrants who collectively send a LOT of money to families abroad. How do remittance flows interact with trade imbalances in the valuation of the dollar, and what is the net effect on the US economy?
1
NPR said this morning that we've had tariffs against steel producers since the Clinton administration. Is that true?
How can we be sure, that whatever trade policy we choose, those who lose jobs due to it are assisted or compensatedÇ
1
I would like to read your response, Paul, to the OpEd next to yours in today's paper, The Case for 'America First' Economics. Thank you.
2
Are the results of a VAT and tariff the same?
1
Mechanically how does foreign trade work? If Walmart wants to buy a cargo container of tee shirts (say $100K worth in China) does Walmart have to pay in Rinminbi? Where do they buy the Rinminbi? Does the Peoples Bank of China sell Rinminbi to Walmart in exchange for Dollars? Would just creating Rinminbi to exchange for Dollars dilute the Chinese economy? How is it valuable to South Korea if they create a steel pipe factory so as to dump pipe in the US, given that no pipe is used in S. Korea. It does not seem that S. Korea could gain a monopoly in steel pipe since US Steel really keeps a lid on the price. Note that if the S. Korean national bank is creating currency so that S. Koreans can be employed they would be economically better off if they just gave out welfare and did not have to buy ore and coal.
What would constrain the next president from immediately rescinding these tariffs ? Why would a bank make loans for new investment on such a flimsy economic foundation?
If auto parts, made of aluminum and steel, are imported to the US, what is the import tax on these? Is it the price of the part? Or the price of the material in the par?
1
Professor Krugman,
Is pig iron, a product needed for the production of finished steel, included in the tariff proposal? I ask because Russia is THE single largest importer of pig iron in the US, taking about 59% of the market share (followed by Brazil and Ukraine). If American mills start producing more steel due to the tariff, as is hoped, it would logically follow that Russian imports of pig iron could substantially increase (since the US is hungry for pig iron, as it uses all of the pig iron it currently produces). Given the circumstances around the President and the ongoing investigations into potential Russian influence in the 2016 election, the question of "who benefits?" from this tariff is disquieting.
We might ask the same question about the US importing of bauxite for the production of aluminum--here again, Russia is a big exporter of bauxite (second to Canada).
1
What is your reaction to Daniel McCarthy's NYTimes op-ed "The Case for Trump's Tariffs and 'America First' Economics"?
How does free trade hurt the middle class? Do you have a response to the op-ed piece by Daniel McCarthy? Is there an advantage to having a more self contained economy of American products with fewer imports?
Please share your ideas on ways forward on the problem of rapid 'good job elimination' and (increasing) inequality – surely one of the drivers of Trump's base. Universal basic income, to me the only credible mitigation on the table, seems so unAmerican - even un-British!
How is a 25% Tariff on American cars sent to China equal to a 2.5% tariff on cars from China sent to the United States?
Is it true that the US military consumes a very small percentage of US-made steel, thereby proving that Trump’s security claim is bogus?
What is the response to the GoP allegation that the impact on the price of a can of beer or a car or whatever will be negligible?
What will be the impact of tariff hikes across different income groups? On employment, real income, consumption and income distribution?
Has the WTO failed by not demanding the sort of pro-US reforms Trump is demanding? Or is this a US failure to bring cases? Or is there no problem?
Can the WTO not declare 'national security' a bogus explanation for a country consuming 70% of domestically produced steel and aluminum and exporting the remainder?
Why was a targeted approach not taken and would this have been superior. And with China the chief culprit but producing only 2-3% of our steel imports, would targeted tariffs be a legitimate expression of US concern? Why hasn't this been done before...or has it?
Politically, who got to Trump? Who is responsible for this high profile debacle? Who are the swamp winners and how did they manage to beat out other powerful vested industrial and regional interests?
The justification for free trade is based upon the assumption that over the long term the trade will be balanced. But the U.S. has been running an overall trade deficit for decades, it is especially bad with China, and there is no foreseeable rebalancing. Instead of just attacking Trump for his incompetent solution, why don’t economists propose their own solution for the problem of trade with China?
It is clear that DT does not understand what the trade deficit is. Why is it so hard for his economic advisors to explain to him the relationship between the trade and budget deficits? Can you do it in a couple of paragraphs?
we are a democracy China is a communist country. I recall the Yellow Umbrella Revolution in Hong Kong and not one American conglomerate or large economic powerful institution supported them in any way to create a true democracy. as I remember it. China admittance into the WTO was hinged on them becoming a democracy. please go out of your comfort zone and for once explain how a democracy can possibly have quote-unquote free trade with a communist government and more importantly why we should enable a communist country I understand you're in economics professor but your commentary often tells into the social and political realm outside of just economics. so could you please put numbers on the true economic Advantage quote-unquote China has by being a communist trading with a democracy. let's not forget that in China you are guilty before proven innocent the exact opposite of the type of law we have in America.
Trump is constantly claiming that TPP and NEFTA are "horrible deals" without offering any specifics. Do you understand his critique of those deals, and how he claims to be able to "fix" them? Does his "fix" make any sense?
Assume that US steel manufacturers will raise their prices to meet the prices of foreign imports at current price plus twenty-five percent.
And steel is twenty-five percent of the cost of a car, where Americans buy on average twelve million cars per year and a car costs on average $30,000.
So the average car cost increase would be around $30,000 * .25 * .25 = $1,800.
And steel workers and their enablers earn an average loaded rate of $100,000.
Q: How many steel worker jobs will the US need to create in order to offset the lost wages that US car buyers pay up for their next car each year?
Is it something like $1800 * 12,000,000 = $100,000 * X New Jobs, and what is X in that equation?
Could it be !800 * 120 = 216,000 new jobs?
And how many people work now in the steel industry?
Figures come before taxes and the business owner's profit take. So don't expect much of the wage losses to higher prices to wind up in the hands of any new steel employees.
What are your thoughts on Dean Baker's argument in his book Rigged, viz, that we subjected workers to global competition while isolating the professional class from similar competition through a combination of credential and intellectual property protections?
I think the practice has planted a bulls eye on the professional class, making it likely that future politicians will follow Trump's lead in exploiting working-class anger.
1
Whatever deleterious changes Trump makes to U.S. trade policy, can they be easily undone by the next president?
What, in your opinion, is the current state of global capitalism and where does global trade fit in the system? What are the strengths and weaknesses of commercial capitalism? What realistic improvements can be made to avoid concentrated wealth and middle class decimation? Why did the U.S. not factor in job/industry loss when entering into global trade agreements - in other words,don't we need to account for losers on our side of any agreement?
1
Questions:
1. Has China lived up the agreements foreseen when it entered the WTO? Should focus be pushing for completing on those promises?
2. The impression is US population think free trades is about getting yellow duckies cheap for their McD happy meal (consumerism). The real payoff will come when China innovates after all the transfer of IP of the last 20 years -- when an Alzheimer's drug is developed in China, instead of the world waiting for US to deliver again. Why is this not used more effectively to promote free trade?
What does a comprehensive approach look liketo helping the losing industries and workers from trade to shift to other productive work and is it credible and viable? How politically viable is this since it marries the laissez-faire attitudes of conservatives on free trade with the socialist leanings of government intervention for its effects to compensate the losers?
The benefits of international trade for world peace have been measured by political scientists for twenty years. See John Oneal and Bruce Russett’s 1997 article in the International Studies Quarterly for an early report (https://academic.oup.com/isq/article-abstract/41/2/267/1821147?redirecte.... See William Nordhaus, John Oneal, and Bruce Russett’s 2012 article in International Organization for a later effort. See Matthew Jackson and Stephen Nei’s 2015 article in the Proceedings of the National Academy of Science for independent confirmation of the pacific benefits of trade (http://www.pnas.org/search/trade%252Bpeace%20content_type%3Ajournal).
John Oneal
Professor Emeritus of Political Science
The University of Alabama
If you were to design a trade policy that would benefit the overall economy but mitigate the harm to the employees of the US "losers" in the resulting trade, how would it look? Or, would you choose to offset that damage with non-trade measures?
In his book, “The Rise Of The Rest,” Fareed Zakaria describes a world fundamentally and permanently changed by a rising third world. In that broader geopolitical context, globalization might not only be seen as a change that enhances the quality of life for the overwhelming majority of the peoples of the world, but also as a net plus, though a somewhat painful one, for Americans. How do we avoid reactionary responses to this inevitable new reality and develop national economic policies which fully utilize our many competitive advantages to achieve a new global economic equilibrium?
Paul Solman interviewed Peter Navarro on The Newshour on March 8: https://www.pbs.org/newshour/show/meet-the-trump-trade-adviser-whose-tar...
Navarro made numerous technical assertions which I did not fully understand.
I would be so appreciative if you would respond to each of Navarro's arguments systematically, point by point.
Thank you so very much for all you do.
How can you, in simple yet resonating words, explain to a Trump voter why this is such a bad decision. Your answer will need to be simple, convincing, energising, truthful, and you need to be able to counter Trump's "America first" rhetoric. Just asking on behalf of all Democrat politicians that need to get elected to win back the house, the senate and the presidency. The truth, not populism, will set them free.
2
If free trade can produce the lowest prices, who's not getting their share?
Someone is being cut out as I see it.
Thanks!
Question on Trade:
OK, let's name names. Who, specifically, are the rich business people who stand to gain by Trump's tariffs on steel and aluminum?
What has Canada and Mexico done right in NAFTA and the United States done poorly?
What do anticipate would be Canadian and Mexican responses, if the need arises?
J
Can the bogus National Security rationale for the proposed tariffs be referred to the Federal Court system to be stopped.
Hi,
Could you respond to the main points in Daniel McCarthy's article of March 9 in the Times. I am especially interested in his point about the loss of the middle class in manufacturing. Didn't that sector's prosperity create political stability?
It's a given that the world is still far from equally wealthy, so when, if ever, are tariffs the right answer and how should they be structured? We already have massive inequality within the US, and the inequality is much worse internationally.
Would it make sense to target only China for instance?
What are the international statistics on number of steel work jobs over the last 3 decades? Are the jobs migrating to Canada? Western Europe? China?
Please discuss (1) evidence of policies here or abroad to address those adversely affected by open trade and (2) mechanisms to slow or end Chinese aggressive tactics vs western firms — eg forced tech transfers— doing business there.
The steel industry I knew disappeared in the early 80's, and the aluminum industry I knew here in the NW disappeared in the late 90's and early 2000's, along with countless jobs. Of course there's some small remnants of both remaining, but the smelters and rolling mills for aluminum, anyway, are long gone, sold for scrap, and the jobs "they ain't coming back." Republicans and Dems of the day hailed a new service economy, a new global system, and told us all that social and economic upheaval was necessary to drag us into the future. I lived through this as a young man, and now I'm old, I've retooled and retrained and came out okay, but I'd prefer it if my children and their families were spared that. Is there any rational or irrational belief that American Primary Metals Might will be restored through private investment in the kind of infrastructure that's flat gone now? What level of investment of GDP would be required to place us at a point on the production curves for steel and aluminum similar to say, 1975? Are the proposed tariff levels even close to what would be required to displace that level of world production back to the US?
How long will it take for the US consumer to feel the affects of these tariffs?
What kind of backlash might there be from exemptions?
I’m an airline pilot. How does the protection we enjoy in our industry compare to the type of tariff protection that’s being proposed for the aluminum and steel industries?
What is the economic trade policy response to a trade imbalance, if China is the target?
Given the following:
1) Commodities are priced in USD, which makes the USD indirectly commodity-backed (to the chagrin of the gold standard backers). Not necessarily a concern until...
2) China joins the WTO in 2001 with a fixed currency to the USD, which given there demand for commodities, causes the rebalancing to happen in the commodity markets up theough 2012.
3) The absence of national sales tax (VAT) in the permits imports from other countries without any material taxation, placing domestic competitors at an even greater cost disadvantage, regardless of the wage differential.
4) Notwithstanding the implications of a trade war, this tariff lacks any materiality given the exemption of Canada who leads the imports into the US of steel and aluminum (16% and 54%). In other words, an act of pure show.
Back to the initial question: what should be the correct policy response, given the above?
As a metallurgist, these tariffs seem problematic at best. For me the issue is not the economics perspective but rather in the science details. A tariff on "steel" or "aluminum" is like a tariff on alcohol. What are the rules for beer, wine, whiskey, etc.? For these metals, the elemental iron and aluminum are alloyed in a myriad of ways, using many other elements. How to handle? Then these various alloys are formed into components of every size and type, from nails to Engine Blocks. What happens to these?
3
In light of the fact Bernie Sanders, Hillary Clinton and Donald Trump all ran on pulling the U.S. out of the TPP entirely, thereby signaling a more isolationistic stance to free trade and globalism, what will our economic prospects be going forward now that we are actually starting to economically isolate ourselves in the manner that the three candidates advocated for on the campaign trail?
Was President Obama correct or not when he said America would be far better off signing onto the TPP than in walking away, or were the other three correct when they said we would be better off walking away?
If other countries want to subsidize the products we buy (by subsidizing their industries) why should we object? We pay less, their taxpayers pay more.
Doesn't the statute under which the tariffs were imposed require some reasonable factual basis ? And wasn't it arbitrary and capricious to impose these by shooting from the hip? It is hard to believe there is any credible basis for them. On a quick search, I found 49 USC 1862. This section requires that a report be filed in the Federal Register by the Secretary of Commerce and if the President takes action, he must provide Congress with a written statement as to the reasons within 30 days after the action. Is there a remedy for Trump's action in the courts or is it all up to our do-nothing- except-accept-bribes Congress?
1
What I do not understand, mindful that you cannot eat a dollar bill, why running trade deficits whereby we are trading paper with no tangible value for products that you can eat? Now of course I understand that a trade imbalance can cost jobs and others owning America. But what more explains the American trade deficit and is buttressed by a strong dollar in the face of trade deficits is that America is exporting its good faith and credit for other nations to use in transactions with each other and not just America. That is running trade deficits since the end of WW2 has allowed America a higher standard of living than without trade deficits and made the US dollar the world currency and therefore how is the bottom line bad for America.
Please explain that Wilbur Ross's beer can example is simplistic and significantly flawed. Help show that steel and aluminum are involved in many aspects of making the beer, fabricating the can, shipping the materials and final product. Help folks see that the beer will become more expense well beyond the additional costs of the raw metals used to make the can.
Thank, Paul!
question: assuming another country (eg., china), especially but not only those which control their industries, subsidizes its manufacture and exports--ie, either directly authorizes exports at "below cost of manufacture" prices or pays all or most of the cost of manufacture, what should our country do, if anything?
if that other country, for example, "dumps" solar panels into the united states, thereby destroying or limiting the domestic manufacture of solar panels, does our government have a role in "protecting" its domestic industry? what should u.s. policy be?
Question for PG: Since the national security rationale has been clearly undermined by Trump's statements that he's just using the threat of tariffs to get a better deal on Nafta, can this action be contested in American courts? And if so, what is the process? Who could bring the action? who would decide? etc.
Does Congress have ANY role in setting trade policy? It seems weird that the president can do all this unilaterally with no input from Congress. Please explain.
2
I guess most trade imbalances are not because of differences in price but because of differences in product quality/innovation/value. Mercedes doesn't sell cars in the US because they are cheaper than Fords and Apple isn't selling I-phones not because they are cheaper than the average smart phone. Is my "hypothesis" correct?
1
When I took an undergrad course at Harvard in International economics, we were taught about comparative advantage. I asked the professor what happens when CA mandates moving auto production to China thus leaving auto workers in the US unemployed and destitute. He smugly answered: that's a political problem not an economic problem! I didn't accept that then and don't accept it now.
The fact is that foreign countries, especially in the Third World, have economic advantages over the US, such as low wages, no pollution regulations, no labor unions, child labor, etc etc.
One could argue that their "comparative advantage" is artificial and unfair to impose on US producers.
How would you respond to this claim?
1
I read that the US would need to withdraw from NAFTA before it could slap tariffs on Mexico or Canada. Is that the case?
And if so doesn't it make this tariff hike a con not to forget the coup: citing a little-used provision "national security" (justification?) to wrest power from Congress and rule by fiat. Once upon a time wasn't that called executive overreach?
A country of laws sounds laudable until you realize how easily a sword to slice through democratic rule and justice can be fashioned from them.
TARIFFS & TRADE:
"The United States Constitution gives Congress the power to impose and collect taxes, tariffs, duties, and the like , and to regulate international commerce. While the Constitution gives the President authority to negotiate international agreements, it assigns him no specific power over international commerce and trade. THUS because the President does not possess express constitutional authority to modify tariffs, he must find authority for tariff"
1
Specially metals (e. g. stainless steel, titanium) are already restricted for national defense contracts to domestic and qualifying country (mostly NATO) sources. Domestic mills tend to focus on these high quality steels. If mild steel were essential for national defense, wouldn’t the right course of action be to expand the rule’s coverage? Otherwise, Trump’s rhetoric is meaningless.
Can you please recommend some good books at advanced undergrad or graduate level that cover international trade and finance and that address the general public's concerns about trade deficits and go beyond Econ 101 static models of comparative advantage? Don't be shy if any of them are by you :)
1
I've read Trump is focusing on steel and aluminium because it provides jobs to people who live in Pennsylvania; and Pennsylvania is going through a key election which the GOP wants to win. Is Trump's play on steel trade tariffs just a political game to score points and woo voters in the Penn election? His recent back-peddling on tariff rules seems to suggest so. If this is just a political points game, and Trump does soften it's blow after the election, how irresponsible and myopic is this this move -- to win an local election at the expense of the global trade market?
2
As expected Senate Minority Leader Charles Schumer has come out against Trump's tariff on imported steel and aluminum but qualified his position by saying that China routinely violates intellectual property agreements with other countries and should be discouraged from continuing the practice.
By what rationale can Trump impose tariffs without an act of Congress?
1
There are always loopholes. How would China or anyone get around the tariffs?
American jobs have been going overseas but isn't the prime reason for that that Ronald Reagan et al. gave corporations incentives to do so? The whole "trade problem" seems to be of the Republican Party's making. And aren't the Republicans also exacerbating the jobs problem by undercutting unions? They keep talking about American workers but pull the rug out from under them every time.
1
Is it possible that a lawsuit could undo these tariffs?
1
I understand and agree with your Op-Ed piece on tarrifs. I never knew about the corruption angle but it makes a lot of sense. That said my question is, why haven't these trade deals protected workers' rights and the environment more? Is that our society has been generally becoming more unequal and the trade deals reflect this, with a positive feedback loop of most benefits accruing to the wealthy corporate interests which in turn have disproportionate influence on the way the trade deals are structured?
In my opinion this is not unrelated to Trump's victory or the support that he gets for tarrifs. If trade deals raised the wages of a Vietnamese worker more and offshored fewer American jobs and made Mexican towns less toxically polluted we very likely wouldn't be in the current mess.
1
I read Daniel McCarthy's piece presenting three arguments in support of tariffs and America First trade policies. Setting aside the particular tariffs imposed yesterday, I wonder if you could respond to his three broad arguments and explain where you believe he is wrong.
1
Please explain you think about the effect of trade deficits on the composition of economic activity in the U.S. Would the U.S. have more manufacturing employment and less service sector employment if the merchandise trade deficit were smaller? And is that something we should care about? I have my own opinions here, but I'd like to your expert view.
If Trump views trade deficits as a 'bad deal' for the US, what policies besides tariffs can reduce trade deficits?
I would like a tutorial on trade issues in general. Some questions:
How can trade imbalances persist for decades?
What is the advantage for a country to take cheap pieces of paper in trade for real stuff?
If industries move to low cost countries, do we lose the opportunity to inject higher technology levels into the industry and provide higher wage jobs?
Are tariffs an effective way to change trade balances? Other countries use non-tariff barriers.
Is it realistic to export moderate wage,low skill jobs and replace them with higher wage, higher skill jobs?
How do trade balances affect social cohesion in the separate trading countries?
Is Trump's claim that protecting the steel industry serves vital national security purposes, realistic?
Aren't average tariffs on industrial goods less than 5% worldwide and nontariff barriers like product standards much more important?
What are your recommendations on fighting trade barriers by China that require local ownership in new companies setting up shop; this is effectively stopping Tesla from setting up operations.
In what ways would trumps move on trade and tariffs specifically benefit Russia?
If, as you say, the tariffs violate US law, will this be decided by our courts?
1
Dr Krugman
It seems that tax money flowing through the Pentagon supports airplane development and production, a robust industry that is closely related to national security.
If having a robust steel and aluminum industry is also vital to national security, what economic policies could be put in place to assure its future health.
Please comment.
My one year of economics is way old, but as I recall, our instructor claimed that direct subsidies to industries made more economic sense than protective tariffs. I also understand that subsidies--other countries'--are one of things that are creating what Trump considers unfair advantages. Would we come out ahead giving direct aid to selected industries, if some are, in fact, threatened?
How do you respond to Trump railing about unbalanced tariffs where, e.g., our auto exports are hit harder than foreign auto imports?
Would not one rather be Canada or Mexico in trade negotiations?
All the US has is tariff threat, essentially extortion.
Why is the trade deficit really a function of the budget deficit, the savings rate, and the investment rate, and not tariff rates or dumping practices? Why does this mean Trump is totally wrong about the effect of Chinese overproduction in the American steel industry?
What is the WTO's process for assessing trade policies like those proposed by Trump? What happens when there is an adverse report by the WTO?
Can Congress through legislation cancel Trump's proposals for tariffs on steel and aluminum?
Isn't it a fact that trade deficits with China have, largely, provided the capital China needed for its modern industrialization?
Trump says he is doing this because of 'national security', and in the next breath links the tariffs to NAFTA negotiations, which seems to belie the 'national security' facade.
In any event, Canada is exempt (for now) pending the NAFTA failure or success.
My question is: let's say the NAFTA negotiations fail and Trump applies the tariffs to Canada. Couldn't Canada go to court and argue the case that the tariffs were not based on 'national security' in the first place?
You and many others have pointed out why what Trump is doing is bad. However, he is reacting to the problems, and perceptions of problems, created by free trade. What constructive measures do you and his critics propose? Without a counter proposal we are left with "at least he's doing something".
What special interest group benefits from this new tariff? Was it enacted as the result of corrupt influence?
1
The media is predictably treating the tariffs issue with its usual both sides-ism. Even NPR is presenting the arguments for and against with equal weight and no real analysis. Would you please refute point by point the administration's trade talking points? This will give those of us who see the folly in Trump's trade policies ammunition to refute these claims to media, friends, relatives etc. Thanks!
2
In a NY Times op-ed on March 5th, Josh Bivens, the director of research at the Economic Policy Institute, argues that we shouldn't worry about Trump's tariffs; that they are "temporary relief for specific sectors (steel and aluminum) facing a specific problem (global excess production capacity, propped up by foreign governmental subsidies)"; and that we need somehow to fix "policy failures that have decimated American manufacturing employment for almost two decades." Is there anything in that assessment that you agree with?
If, as you and many suggest, the imposition of tariffs violates U.S. law, then who is empowered to challenge this in court? A law that cannot be enforced is no law at all.
1
Is china violating international trade rules? If so, what is a legal and effective response under WTO and other international trade agreements signed by the US.
Using access to our huge markets as a means to improve the entire world through trade is agreeable.
Do you think America handled the effects of such access well and how might we have done better?
Let’s assume that the tariffs are a threat to gain other concessions from US trading partners. What strategy would individual countries employ to negate the threat? What coordinated strategy would also be a successful countermeasure?
Since free trade is not a win-win for all, what have countries done (or should do) to help those citizens that are negatively impacted by free trade? Seems that the lack of an adeqate safety net in the US helped spawn the anger that Trump has tapped into.
1
Dr. K – Clearly the Trump trade tariffs are unwise and have HUGE downside risks. To me, reiterating these facts is less interesting and useful than addressing these three interrelated questions: (1) What are the unfair trade practices regarding which we should be most troubled? (2) What are the intelligent, effective ways to tackle those unfair trade practices (e.g., can we really do something about unfair currently manipulation)? (3) RE: the narrative that Peter Navarro has been pushing, do any of his points have merit? Where is his narrative wrong? Which of his points are in between merit and flat-out wrong? I would greatly appreciate your weighing in on these 3 Qs.
Doug Miller, St. Louis
Good column this morning. So on the cui bono question, who benefits from higher tariffs on steel and aluminum? Domestic producers, obviously, but is there anybody else? (I'm also reminded of Mrs. Clinton's remark in one of the 2016 debates that Trump built his hotels with Chinese steel.)
Why is it that some countries, Germany for example, appear to have done a much better job at protecting their industrial working class while still participating fully in the global economy?
1) A stronger sense of patriotism from German CEOs?
2) Stronger unions?
3) Better education support for workers?
4) None of the above, German workers are actually just as disenfranchised as American workers?
When Trump says, "I want reciprocal trade" "It's called reciprocal trade" & so on (& on), is he talking about reciprocal trade in the sense you cite in your column today, that of FDR, which evolved into global treaties? Is it different (& how?) Or is it entirely meaningless, as so much of what he says?
Since all nations engage in some form of protectionism, how do you differentiate between good and bad protective tariffs?
How would Trump's Tariffs fare under the WTO system? Can our trading partners retaliate by imposing countering tariffs?
thank you for doing this, Paul.
I hear often on MSNBC and other liberal stations that "trade deficits don't matter." (I'm on the left, so liberal is not a dirty word to me.) Presumably they mean they don't affect our domestic standard of living. I understand the basic trade theory of "comparative advantage", where productivity is gained through countries concentrating on their most productively produced goods, and why all countries (as opposed to all people -- as noted in your column 3/9) should benefit. But there seem to be holes in this theory that i hope you can address:
1) imports are a SUBTRACTION from GDP (GDP=C + G +I + Exports - Imports). thus, if the trade deficits are large enough, don't they negatively impact GDP per capita? further, wouldn't the overall impact be: (the amount of extra productivity gained though trade comparative advantage) - (the amount of GDP lost though trade deficits)? am i going wrong somewhere?
2) To take China as example, using the GDP formula above, isn't Trump right in saying that the large annual trade deficits with China have been a massive wealth transfer, from us to them?
3) Does the theory of comparative advantage even hold these days? You recently used the example that "it makes sense to smelt aluminum in Canada", due to low energy costs. I can see thisholding in trade between high wage countries, but isn't most trade between countries like the US and China, Vietnam, etc. simply labor cost arbitrage?
1
How is it possible to balance the obvious positive effects of free trade, with the obvious negative effects. For instance, if the government is going to enter a free trade deal that hits a certain industry, should they provide some sort of aid to that industry? People often talk of retraining workers, but is that a viable solution. Finally, do we bear any responsibility for how a free trade deal effects other countries, for example, Mexican farmers who were priced out, or forced to grow cheap American GM corn after NAFTA.
1
There seems to be little question that tariffs were responsible for the past success the US has had in becoming an industrial powerhouse. Could the selective use of tariffs be used today to maintain our industrial capability? For example, tariffs on solar panels seem to be of questionable value because our solar power industry depends on them to compete against fossil fuel energy sources. But tariffs on, say, automobiles should help our auto industry.
Regarding the basics: A trade war suggests that international trade will slow down. Under likely scenarios of upcoming trade slowdowns, what would this mean in terms of reduced imports and exports overall and increased prices for consumers in the US and abroad?
Could the move to robotic automation rebalance the trade surplus/deficit? Specifically, here is what I am thinking: One way of looking at the current situation is that China has fine-tuned its industry to produce what the US wants at cheap prices but the US has restricted participation in the Chinese market since there is no way to compete with low wages (say, in producing something like chopsticks). In the northwest, there is affordable power and an abundant source of high quality wood resources. So, in this example, my question is: Could robotic automation counterbalance cheap labor and conceivably allow the US to sell chopsticks to China?
Where is the money from the tariffs directed? Does it go to the industries that the benefit from the tariffs, or does it go to the treasury? If the latter, can those funds be used to help other industries that are negatively affected by the tariffs? I am on the free-trade side of the issue, but now that the tariffs are going to put into effect I’d like to "follow the money".
I have two questions;
1. I have heard that the U.S. steel industry is currently operating at about 78% capacity. Of the 22% unused capacity, how much is obsolete or inefficient technology?
2. Is President Trump's tariff declaration subject to congressional approval? If not, can't Congress act to nullify the tariffs?
Living in the Northern Plains, a large region of importance to the world agricultural economy, I wanted to know what, if any, are the expected "spillover" effects of tariffs on steel and aluminum. Even if Canada and Mexico are excluded, I fear the loss of a free trade ethic in our economy out here. How would we even measure any loss?
2
As in most things, the tariff on steel and Aluminum is not entirely wrong. Some specialty steel and some specialty aluminum are important to our defense. Particularly in aero space. We must be self sufficient on this segment of these industries. Also new advancements in specialty metals have been made almost exclusively by American producers, particularly ATI. How can These companies continue in research without a base of income?
2
Kai Ryssdal/Marketplace interviewed Lisa Goldenberg of Delaware Steel earlier this week. She is already raising prices that are being passed on to the manufacturers she supplies. She commented on the dichotomy of the fact that the steel companies will love this but the parts suppliers and manufacturers are already having to face the burden of passing on the costs. Can you comment further on that dichotomy. It appears to me that, again, big corporations (steel companies) wil;l benefit and we, the consumers, will clearly be impacted by end-user price increases. Why does this look like a good deal to anyone except the steel companies and their investors?
1
So many questions:
Are other nations, in fact, dumping aluminum and steel? If so, why are tariffs not a reasonable response? What, if anything, should the response be?
Trump has made reference to other protectionist policies in other countries. Is he right about that? If so, again, what should our response be, if not to respond in kind?
Finally, the piece that appeared alongside your column, "The Case for Tariffs," was an interesting counterpoint. Could you respond directly to that piece's arguments?
1
I don't understand why increasing tariffs will in fact hurt the industries they are trying to protect.
Thanks Paul
1
The US has had a long run of prosperity fueled, in part, by a well-educated workforce, produced by a nationwide system of affordable public universities. College is no longer the bargain-priced investment in the nation's economic future that it was fifty years ago. To put it bluntly: How is the US going to compete in a technologically demanding world economy?
Three questions, if I may ask. (1) Am I correct in thinking that the annual current account deficit (mostly trade) represents the annual cross-border overspending of a national economy, i. e. living beyond its means? (2) Am I correct in thinking that the annual current account deficit represents the annual transfer of domestically owned assets into foreign ownership (with future returns on those assets going abroad)? (3) Am I correct in thinking that, internationally, the annual US current account deficit acts like deficit spending for the rest of the world? In other words, US deficits since the Vietnam war have have provided for growth and income in the rest of the world which growth and income would have been much less otherwise?
It's hard to evaluate the tariff situation without current data. I (and I assume many other Times readers) would really appreciate a table of current tariffs imposed on the US by other countries, compared with tariffs on those countries by the US.
1
As an architect working on medium and large-scale projects in the US, I wonder what the impact of Trump's - apparently ill-conceived - Steel and Aluminum tariffs (or Trade War the tariffs may trigger) will have on construction costs for our domestic projects. Please comment on the likely short and long term impacts and what it might take to dig the construction industry out of this mess.
Could someone provide some analysis of what these tariffs will do to consumer prices of affected goods (like cars)? There is very little discussion of how much more we are going to pay for things and I’ll bet it would get the attention of the larger electorate.
Do you anticipate Trump’s tariff/trade policies wil result in increased inflation that will wipe out the modest tax plan savings for average Americans in the first few years? Just like Social Security increases were largely absorbed by Medicare premium increases?
1
Dr. Krugman: In light of the success of fracking, my question is two parts: fracking has brought about dramatic increases in the production of oil, natural gas and derivative products. Now that the restriction on exporting US energy products has been rescinded, are there any long-term projections on how the increase in energy exports will affect our trade balance? The resurgence of US natural gas production has attracted a number of foreign companies to build industrial plants, especially chemical / plastics in the USA. Again, are there any projections on how the export from these new plants will affect our trade balance and the flip side of the coin: once these new plants are in production will our imports of these items decrease enough to affect our overall trade balance?
Some really basic questions:
1. Literally every small consumer item I buy is made in China. Please explain how this came to be (and whether you think we can or should take steps to change it.)
2. Should all manufacturing jobs flow to the lowest cost, lowest wage environments, regardless of working conditions or environmental impacts? If not, how can a free trade system prevent this?
3. The government of China is subsidizing the growth of its electric car industry by providing very significant subsidies (about 1/3 of cost) to consumers. This subsidy will allow the industry to scale up much more quickly and produce electric cars cheaper than anyone else. In a free trade world, is this good planning, or cheating?
7
Paul, could a trade war with our European allies endanger the dollar's status as the reserve currency?
What would be the likely impact on the US of an abandonment of the dollar as the reserve currency, in this era of ever-expanding national deficits?
Would restoration of progressive rates of taxation on globalization's winners within the US be a more effective means of addressing the challenging impacts of global trade?
2
David Ricardo established the benefits of trade in the 18th century. The planned economy of China established the benefits of protecting its industries in the 20th century. France too used state control and regulation to protect its industries. Both France and China had positive outcomes from these regulations, but of couse they did upset many trading partners. Can we not agree that a certain level of state planning and regulation does benefit the internal economy of a nation?
3
1. Please explain why a trade deficit is unlike a budget deficit. Donald doesn't seem to understand that.
2. Big Steel moved out of America to avoid organized labor's demands for decent wages and benefits. Now that unions are all but moribund in the private sector, what are the expected jobs and benefits of returning highly automated steel production to the states?
1
How will this impact manufacturers of cars with plants in US. Won't this give a substantial advantage to Korean and Japanese manufacturers that can buy and use cheaper steel and aluminum in thier cars? If so how big a factor is this? One problem with protectionism is who gets protected and who is left out. In Maine the shoe industry was decimated by imports. is it a matter of political clout?
Is a trade imbalance caused by the values of currencies in relation to each other? Or vice versa? Or are they two interrelated pieces of a complex puzzle? What effect, if any, does a government deficit or surplus have on trade imbalance or currency strength?
How free is our trade with the world actually? Do we currently have any comparable (in scope and scale) tariffs in place? I hear that the EU has a 10% tariff on US cars. Is that true? Are there other tariffs in place against us similar in scope or scale to that one or the new ones the Trump admin. has placed?
Thank you for your time.
2
I am the son of a steelworker, born and raised in a steel town just outside of Pittsburgh. I am also a lifelong Democrat who did not vote for Trump in 2016 and will not vote for him in 2020. Nevertheless, I am in favor of Trump's tariffs. My Father's employment in the steel mills together with his membership in the USW allowed my family a middle class life and, along with the GI Bill, allowed me to attend college and professional school. I long to see the mills working again and to see families have the same opportunities mine did. Dr. Krugman, how do we bring those heavy manufacturing jobs back without protectionism? Thank you.
1
Protectionism was the name of the game in the late 19th century, but not anymore. Can you clarify the conditions in which protectionism may be an appropriate policy approach and why those conditions are no longer true? I teach honors economics and this has been an issue of discussion.
1
Dr. Krugman, I have some trouble understanding how financial services and products are factored (or not) to calculate trade balances. Given that the US financial sector is by far the largest in the world, and US financial products the main currency in financial markets, it appears to me that most gains from potential trade surpluses with us in goods and other services, would end invested back in US financial products and services; and thus, if those are factored in the trade balance calculations, shouldn't we be running only marginal trade deficits or even surpluses with most countries? Eating our cake and keeping it, of sorts.
Thus, when doing the math, is the financial industry included as any other industry, or they are treated separately? Why, and how does that affect the equation?
Thank you so much!
Dr. Krugman,
You may want to read this article by Dr. Anwar Shaikh on the laws of international exchange. Yes, I know that you won a Nobel Prize and all, but if you don't agree with Dr. Shaikh, what are your reasons for doing so?
http://www.anwarshaikhecon.org/sortable/images/docs/publications/interna...
From what i have read, the USA has in net, benefited from trade agreements. If that is true, why have wages been depressed and why is the balance of trade always negative.
Overwhelming majorities of Democrats in Congress have voted against NAFTA and other FTA's, mostly because they're afraid of outsourcing of production and loss of jobs to low-cost countries. Trump makes this policy central to his campaign and wins the election. The only counter measure I can remember Democrats were fighting for was more money to pay for retraining of the workforce and to temporarily finance healthcare for those who lost their jobs because of outsourcing. I disagree with the Trump steel and aluminum tariffs. Now we know that the loss of jobs were more the result of automation and other technical changes than outsourcing of production. What do you think US should have started to do 10-20 years ago to keep more production at home?
What is wrong with retraining the work force and temporary health care insurance for unemployed workers? And what difference does it make about what should have been done 10 to 20 years ago...What should be done now?
1
Assuming that free trade does tend to produce the lowest prices for consumers why should lower prices be the value that overrides all other considerations, such as a more equal distribution of wealth and income?
6
How about the arguments in today’s paper in favor of tariffs? Protecting middle class, national security, and some situations where it helps (China). I thought one problem is that there is no real reciprocity.
Isn't true that the major loss in good - paying union jobs in steel is in great part due to state- sponsored over production of steel in low wage industries in China and other countries? What is your response to these workers and their union leadership like Leo Girard who support the tariffs? If tariffs are not the answer, what should they be advocating to protect their jobs and communities from the devastation they've experienced?
1
To those who ask for tarrifs to protect manufacturing jobs and capacity shouldn't the tarrifs be on finished products vs raw materials?
2
Have not international trade agreements allowed capital to impoverish labor and degrade the environment? How can trade agreements be used to reduce economic inequality and environmental degradation instead?
2
No nation has had - by Trump’s reasoning - a more favorable trade balance than 18th century Jamaica: 18 hours of work a day for everyone, massive exports, and almost no imports. But they don’t seem to have appreciated how good they had it.
Other countries are sending us their products in exchange for green paper. Would we be happier knowing we held huge reserves of euros, pounds and yen, expecting some day we could use it to buy wine, cheese, sushi, and shepherd’s pie?
Why is the self-crowned ‘king of debt’ afraid of debt?
My knowledge of economics is rudimentary, to say the least, so this is a non-wonkish question, and I hope it can be answered in a non-wonkish way.
My late father worked in the aluminum industry for three decades. Fortunately, he was able to retire early, thanks in part to a good pension (and the union that negotiated its terms). But many of his younger coworkers were not so lucky. The plant he had given so many years of his life to padlocked its doors not long after his retirement. So my question is simple: how do you explain to someone like my father why Trump's tariffs are a bad thing?
2
Tariffs will not reopen that factory.
Foreign steel producers see their price go up by the tariffs. Must they not lower their costs to stay competitive? In other words, tariffs will spurn innovation abroad and leave the US steel industry further behind?
1
You wrote that "tariffs will spurn innovation abroad."
Don't you mean that tariffs will spur innovation abroad?
How do we level the playing field? If foreign producers do not meet environmental and working condition standards that are in place in the USA, Canada and other western countries then it seems there should be a cost to those producers. Also, seems we have not done enough to support those who lose jobs when producers move to foreign locations. What should we do to retrain and otherwise offset those job losses?
1
Danial McCarthy argues that economic nationalism can lessen inequality, apparently believing that a service based economy is a major contributor to inequality and that reviving manufacturing can help alleviate the problem. What is your take on that (assuming that protectionist policies actually does increase industrial productivity)?
Looking at the big picture from the point of view of job creation I don't understand something. Our trade deficit with the world as a whole is little over 500 billion – actually a small percentage of the GDP. Nonetheless, suppose suddenly all trade stopped (admittedly impossible because there are things we simply need and cannot provide ourselves) wouldn't we end up producing 500 billion worth more stuff and services? Inefficiencies, slow down, and other objections aside would that not end up with a net creation of jobs?
(As an aside, I am well aware of Ricardo. The problem with his picture today is that people who give up jobs in the more advanced country and are supposed to end up with better ones, are not getting such because of automation.)
1
Thank you for your column today. If, as you note, regarding the introduction of international trade agreements, "[T]his approach introduced a new set of special interests, exporters, who could offer countervailing power against the influence of special interests seeking protection," won't those exporters use their influence to lobby against tariffs now if they are negatively impacted? Are their voices speaking up? Being heard?
Q:
What effect will tariffs, or a trade war, have on already low growth rates in US productivity?
2
Good luck, Dr. Krugman. These are great questions here and I look forward to you answering all of them.
Trump's tariffs policy is seemingly popular with his base who feel like they got the raw end of the deal on free trade, but in fact Trump embraces the rise of corporatism, so are these tariffs simply symbolic gestures?
Is there a way in which trade deals be engineered to genuinely benefit the public at large? Can you address the Investor-State dispute Settlement (ISDS) issue that was a sticking point for Elizabeth Warren in the TPP agreement?
We have not seen any scenarios showing the potential impact of the tariffs on our economy. As a business person, I am accustomed to seeing "what ifs" and strategies around a particular decision before it is actually enacted. My questions:
Can you estimate the effect of Trump's decision on industries reliant on aluminum and steel? Consumer packaged goods like sodas, or the auto industry?
What is the potential impact of retaliatory measures on some of America's exports, such as whiskey, vehicles, foodstuffs?
What is the impact of new tariffs on subsidary industries in international trade in the U.S., such as maritime shipping, trucking, port activity? (We have a close relative in maritime shipping, and the new decisions are rocking the professional community.)
If indeed the tariffs were enacted to respond to narrow protectionist interests, then business scenarios would uncover the pitfalls.
If European nations hit by US tariffs are strategic enough to hit back against red state businesses, what products will they raise tariffs on? The bourbon and blue jeans tariffs that have been mentioned seem like examples of tariffs targeted to hit Trump supporters.
Please help us understand the causes and consequences of our bilateral trade deficits. In particular, what are the relationships among such variables as national per-capita GDP, national population size, national productivity rate, and trade deficits. It would seem that in most bilateral cases with less populous and less wealthy developed countries (wealth as measured in per-capita GDP) the U.S. would typically import more than it would export. Is this the case and, if so, what are the long term economic consequences of such a deficit?
What part did Nafta play in the rise of median incomes (or lack thereof) in the three countries that signed the agreement?
Dr. Krugman, do you believe that protectionism is ever warranted in international trade? Under what circumstances, and by what mechanisms, should the levels of tariffs, quotas and other types of protectionism be arrived at and implemented?
The tax bill Trump signed was expected to worsen our trade deficit, in that it would increase budget deficits, which would push up interest rates and, in turn, the dollar. But the dollar's been falling as interest rates have been rising. Can you explain why?
There are economists on both camps of the foreign trade debate. Mr. Trump obviously displays Peter Navarro to give legitimacy to his trade-policy directive, and one cannot completely dismiss Navarro's arguments. Because of the complexity of the topic of foreign trade, truth inevitably lies somewhere between the two camps. If one were going to survey top-notch economists and average their weighted opinions, with weights according to some form of scholarship weight, where would the needle point? (100% for weighted average in favor of tariffs, 0% for totally against, and 50% for average split among the two camps).
1
Is it true that the US still produces about 70% of the steel consumed in the US? That seems like a good amount. Would 90% be better? Most likely, but what is the right amount? What does increasing that capacity and subsidizing it cost other consuming industries?
3
Can you comment on the effectiveness of the Bush Steel tariffs. When those tariffs were imposed, which I think were 30%, the US steelmakers raised their prices immediately by 30%, leaving them with no competitive advantage. I know more is preferred to less, but why would they do this?
3
Is it possible that the aluminum and steel tariffs will revive these industries in the U.S.? If so, will this be a political win for President Trump or will revival of some industries be offset by major declines in other sectors/industries? I read very little about what, exactly, is forecast for those industries that will be protected by the new tariffs.
2
"In a 2012 report, the National Academy of Sciences noted the share of total worldwide fabrication capacity located in the United States had dropped from 42% in 1980, to 30% in 1990, and to 16% in 2007. The reasons behind the shift, according to industry experts, were the rapid expansion of Asian semiconductor companies and offshore investment by U.S. companies.", Charles Wessner and Alan Wolff, Rising to the Challenge: U.S. Innovation for the Global Economy, National Research Council, 2012, p. 340
I understand that one might quibble with those percentages, but the accuracy of the trend seems to be correct.
Do you see that US trade policy has worked with tax policy to encourage offshore production by US companies?
4
Should India be concerned?
PK, you too ? Please do not hate Trump more than you love your country ?
Hello Paul,
What will be the effect on Brazil of these tariffs ? The economy of Brazil is slowly crawling out of bad recession. This can't be good for Brazil. I noticed that a Brazilian steel company ,Companhia Siderúrgica Nacional (SID), was down 5% yesterday. Will it get worse for Brazil? I don't think there is a way for them to fight back.
2
How would you respond to Daniel McCarthy's op-ed?
1
If this is a trade negotiation tactics - what are the possible leverages of this move?
Since this is fundamentally a violation of US law, would the best approach to stop this madness be a suit to halt enforcement of he tariffs? Who has standing to file such a suit? If we wait for Congress to act, Godot will get here first
4
Daniel McCarthy on his 3/8 /18 op-ed piece raises interesting questions regarding national security, etc. I'd be interested in your take on his column.
1
How can Trump unilaterally impose tariffs without congressional approval?
Thank you.
JCS
2
This is a question coming from a non-wonkish but devoted reader of your column: What do you think retaliation to these particular tariffs will look like in the next year? And what sequence of events arising from these tariffs could/would throw the US economy back into recession?
2
Question: What do you say to the Washington Post op ed March 8 by Charles Koch, one of the biggest funders of the right wing GOP?
Quote:
1. “Corporate leaders must reject Trump’s tariffs… Free exchange enables growth and innovations that uplift everyone, not just a privileged few.”
2. “Tariffs increase prices...they fail to increase the number of jobs overall.....trade barriers devastated Detroit….Countries with the freest trade tend to be the most tolerant. Restrictions on trade pit people against each other.”
3. "Bush’s 30% tariffs increased consumer costs and higher unemployment.
Obama’s tariffs on Chinese tires burdened consumers with $1.1 billion in higher prices. The cost per job saved was nearly $1 million, not considering all the lost jobs that went unmeasured.”
4. “Our entire economy is rife with cronyism….free trade has been essential to our society's prosperity and to people improving their lives.
Tariffs may preserve some jobs, but they reduce many other higher productivity jobs. Net effect---lower productivity, less choice, competition, innovation and opportunity.”
VS
Lori Wallach of Global Trade Watch said on Democracy Now---
1. “ Trump is despicable but his tariffs would lead to rehiring of a lot of the workers’ shifts that have been stopped in aluminum and in steel.
2. Research shows after Bush’s 30% tariffs, prices did not jump.”
What do you say, PK?
1
Is this really happening?
1
Please explain some of your ideas in your book on trade.
What are your insights about Daniel McCarthy's arguments for economic nationalism in his NYT opinion piece dated March 8?
Can we trade Trump fpr a player to be named later?
I work in steelmaking. Should I stay or go?
Please comment on McCarthy’s opinion piece on tariffs and free trade published in NYT 3/8/18.
His points seem reasonable.
Where does GATT stand on this?
I would like very much to see a point by point discussion of Daniel McCarthy's piece in todays NYT.
It's very scary when one person has so much power and is using it against the best interests of America . The institutions which are supposed to provide check and balances seem unable to intervene. Does it mean we will have to wait till the President destroys the country and ,demoralize its people to stop him. I thought this was something which only occurs in closed autocratic and totalitarian societies!
1
Isn't it true that:
-- two isolated nations (south pacific islands?) who both have currencies that float (bongo- and bango-bucks) can never become poorer by trading with each other, only richer?
-- if a nation is better at producing every product also made by another nation, both can still benefit from trade because of comparative advantages between local production within each nation?
-- the IMPORTS are desirable, and not specifically the exports? Note: other countries give us stuff in exchange for stuff we have in abundance.
-- balanced exchange rates between floating bongo & bango-bucks depend on all the import and export of goods, plus all import/export of services, plus all massive capital investments made in the other country, plus needs of central banks to hold stacks of the other's currency? On a pie chart, what are these fractions for Canada-USA? Who cares about such a small sliver as an imbalance in trade goods in this growing pie?
-- for a national policy with floating currency, the best situation is the highest possible dollar consistent with full employment? Sounds like the recent US?
-- no great nation in a 21st century democracy can govern themselves without public education competent enough to understand the modern complexities?
-- Conclusion. The Problem? It is those countries who do NOT permit their currencies to fluctuate; who do NOT permit free trade in all ways; and who squeal about "FAIR" trade (a Victorian dog whistle from colonialism).
What can be done to stymie or ameliorate, or overturn the impact of Trump's flawed policy? By a all-too-compliant Congress? By the courts? By the citizens?
Daniel McCarhthy makes a principled defense of Trump’s tariffs (he calls them economic nationalism) in his NYT op-ed column today. How do you answer his argument?
The shocking issue on trade is outright corruption. Televisons used to be manufactured in the USA, mostly in Chicagoland, into the 1970s. This rapidly changed. Around 1980, most TVs were manufactured in Japan. Some claimed Japan won the industry by being more completive. Reality was worse. American executives accepted bribes from Japan businesses to give them the manufacturing business. We sold off our workers and industry to corupt hometown leaders. Ironically, since about 2000, TVs are no longer made in Japan. Other markets have aquired the business.
What is the WTO appear process? How quickly can it respond?
I believe that it’s better, economically, to buy raw materials like steel and aluminum from the least expensive source. Can you explain why?
Why do (some) unions support the tarrifs?
Daniel McCarthy is the March 9 Times argues for a (my words) "modified nationalist economic policy."
His argument seems to make sense to me, a non-economist but skeptical believer in so-called "free trade."
Your comments on Mr. McCarthy's argument.
From a NYT letter to the Editor this week:
Re “Trump Resolute as G.O.P. Leaders Criticize Tariffs” (front page, March 6):
People fretting about President Trump’s threat to impose tariffs on steel and aluminum are leaving a crucial factor out of their equation: a special election in Pennsylvania’s 18th Congressional District next Tuesday. The district is in the state’s steel and coal belt, including suburbs of Pittsburgh. By threatening the tariffs, Mr. Trump is hoping to swing enough votes to keep the district in his party’s hands and avoid another humiliating off-cycle loss. Why aluminum? Alcoa is based in Pittsburgh......(letter continues)...
What is your view of Bernie Sanders' trade policies?
Tariffs cause a redistribution of a small pie; are there ways to structure subsidies to the losers of global trade that have less distortion of international prices? (for example, tax credits on domestic sales?)
In the fanciful world of Pareto economics trade increases welfare because the winners compensate the losers, and there are left-over winnings to make everyone (or some) even better off.
The concentration of production (and wealth) in a smaller fraction of counties has left large swaths of the country worse off, even though the overall pie is larger.
Shouldn't we have a more open discussion on "redistribution", which tariffs are (and might have been better as part of the Tax bill; see, e.g., reasons for not having a border adjustment tax, which don't apply to a high-frequency trading one).
I thought there are international economic organizations set up to regulate trade between nations. If Trump thinks the US is being treated unfairly, why doesn't he appeal to these organizations? Will these associations pass judgment on Trump's new tariffs and possibly impose sanctions on the US? What are your opinions of such organizations, as to their fairness and efficacy, Mr. Krugman?
Please comment on the issue of “dumping” which does seem to be a problem. And what would be an appropriate and effective way to deal with it. Thank you.
Quebec is s a major provider of aluminum because of our vast and cheap access to hydroelectric power. As such, Quebeckers were aghast with the possible imposition of tariffs on metal being imported into your country. How can Americans be hoodwinked once again (as they were with the tax cuts) into believing that short term gain in a very restricted sector will not result in long term pain for the US as a whole? This bodes very poorly for current and future Canada-US trade talks and Canada’s longstanding friendship with the US.
Paul, isn't there anything Congress can do to stop the "so-called president" from doing this unilaterally?
Why did the WTO eschew ILO labor standards but TPP adopt them?
How does this Trump Trade War help Russia?
Why do politicians consistently blame other countries for our loss of manufacturing jobs and not our own corporations? It seems to me that our corporations stabbed the American workers in the back by moving their manufacturing overseas to make greater profits. It is our greedy corporations that are to blame for our woes, not so much other countries. The politicians won't blame our corporations because the corporations own them.
If Trump is violating US law in announcing his new tariffs, what are the chances of stopping him by challenging the legality of his actions in court?
I am wondering how Mr Trump got through his MBA at Wharton without understanding the economics of trade.
Maybe start with “Tariffs For Dummies” (me!) -
Who pays? (Importer I’d guess)
Who do they pay? (US Treasury?)
How do they pay, like payroll taxes?
Who enforces this?
How much more will the Treasury receive per year?
Is the money earmarked for anything or just go into the “pot”?
How much do we (taxpayers) already collect from tariffs?
Are tariffs simply an indirect and probably inefficient tax on consumers?
Are any Trump-branded products currently subjected to tariffs? (Ok, that’s just snarky)
I used to read you religiously but now I think you're a dotard, like most of the Liberal Left: My question is, "Doesn't it make sense to impose tariffs that equal the tariffs that are already being used against us from most nations on earth?" Old Testament, an eye for an eye?
1
I understand that Trump’s steel and aluminum tariffs seem both too broad (they impact dozens of countries) and mistargeted (because exempt Canada, not China, is our biggest supplier). However, if China is subsidizing its industries (technology in particular worries me), violating basic worker rights and manipulating its currency, shouldn’t we do something to prevent this unfair competition?
Are we trading warm bodies? Is there any evidence of a recent brain drain to other countries, or perhaps a mass return of foreign students to their home countries where in the past they might have stayed in the US?
What would trade war between USA and China mean for EU?
I keep reading that no country wins in a trade war, but could a combined front of countries from the EU, NAFTA and TPP inflict catastrophic damage to the US economy? Enough to make Trump back down, or his supporters abandon him?
How can we help with the Trumpfestation in your White House?
Paul, love you and your opinion pieces (even the wonky ones). why do I have to have a Facebook account to ask questions? Can’t NYT provide a way to ask outside of that service?
Here’s my question:
Given that some countries subsidize their heavy industry, what’s the most effective way to try to level the playing field for our domestic workers? Specifically, I’m interested in policies that would be defendable against Republican attacks decrying “protectionism and market distortion”.
1
Please respond to Daniel McCarthy's article point-for-point. His arguments are very convincing but counter to yours. Someone is drinking cool aid here and without an authentic debate it's impossible to know which position is less self-serving.