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Paul Krugman warns that Trump’s trade policies pose a threat to the US economy.
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Krugman said Trump’s tactics are causing tensions with trading partners.
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He predicted a “divorce” between the United States and its major trading partners.
Paul Krugman believes that Americans will ultimately be the biggest losers from America’s chaotic trade policies.
The Nobel Prize-winning economist believes that Donald Trump’s trade policies and aggressive negotiating tactics are causing global instability that will eventually come back to the United States.
While Krugman’s recent focus has been on affordability, he believes Trump’s trade strategy will hurt already struggling American consumers.
Other economists and market commentators have sounded similar alarms. Moody’s Analytics chief economist Mark Zandi predicted that tariffs could plunge the United States into recession, and hedge fund billionaire Ray Dalio recently speculated that tariffs could lead to a global war on capital.
In a Substack article, Krugman highlighted what he sees as Trump’s focus on forcing other countries to make deals.
“Now that America’s economic relationships with other countries have become abusive, the world is heading toward divorce,” he said. “This will make Americans significantly poorer.”
As a result of this “divorce,” U.S. trading partners will make more deals with each other and fewer with the United States.
A recent study showed that American consumers were forced to bear nearly the entire cost of Trump’s tariffs, but now Krugman believes they will be stuck with another bill as Trump continues to use tariffs as a negotiating tool.
Krugman believes that trade data shows that other countries attach greater importance to joining the EU than the United States.
“This metric tells us how much of other countries’ output is sold to the United States,” Krugman noted. “On average, the answer is less than 5 percent, and if you exclude Canada and Mexico, the number is much lower.”
The economist added that the figure is also doubled if calculated in EU terms. Simply put, when the total output of other countries is added up, twice as much is sold to the EU as to the United States.
He said other countries are aware of this and are seeking to distance themselves from the United States in favor of maintaining good relations with the European Union. Krugman cited India’s recent trade deal with the European Union as an example to highlight what he sees as a trend of “economic divorce.”
“Unlike Donald Trump, who thinks international trade is a zero-sum game, both Europeans and Indians understand that a free trade agreement between them is a very good deal for both parties,” he said.
Read the original article on Business Insider