'Looming trade war': Economist Paul Krugman explains why world is 'a much scarier place now'

Liberal economist and former New York Times columnist Paul Krugman disagrees with the late conservative economist Milton Friedman on many things, but one area where Krugman is very much in agreement with Friedman is on tariffs. Krugman, like Friedman, believes that tariffs are terrible for both businesses and consumers — and he fears that the aggressive new tariffs President Donald Trump is imposing on Canada, Mexico and other longtime allies could help get the U.S. into a bad recession.

No good, Krugman warns, can come from Trump getting the U.S. into all-out trade wars with Canada, Mexico and countries in the European Union (EU).

During an appearance on the "Trade Walks" podcast posted on March 16, Krugman cited trade wars as one of the reasons the world is facing a dangerously unstable period.

READ MORE: 'You can't just use guns': Maddow raises concern over DOGE's use of weapons

Krugman explained, "The world used to be — well, OK, there was the Soviet bloc, but the world's market economies were relatively easy with each other. It was a relatively frictionless world and a world in which disputes tended to be minor. We had trade issues. We had chlorinated chickens and that sort of thing, but not existential issues. And the world is a much scarier place now."

According to Krugman, one possible result of trade wars is the U.S. losing access to technology it badly needs.

The economist argued, "So, even a couple of months ago, I would've said that nobody worries about ASML and the fact that that really high-end chip manufacturing equipment is all in the Netherlands. No one expects the Dutch to engage in an aggressive campaign of conquest. But on the other hand, if we're talking about a looming trade war between the United States and the EU, the United States might suddenly find itself cut off from the equipment that it needs to produce high-end chips."

Krugman added, "So, I would say that we weren't thinking about it. I would have actually said it was inconceivable that we would be in the kind of world that we're now in — so, a failure of imagination."

READ MORE: 'An earthquake': Mysterious recusal could shake up pivotal Supreme Court religion case

Listen to Paul Krugman on the full podcast at this link.