Trump's new 'scam' will hurt Americans: Economist Paul Krugman

30 July

Economist and 2008 Nobel Prize winner Paul Krugman speaking at FIDES 2023 in Rio de Janeiro, Brazil on September 25, 2023 (A.PAES/Shutterstock.com)

President Donald Trump is bragging about a major trade deal with the European Union (EU), and his MAGA cheerleaders are claiming that the deal is a big win for the United States. But liberal economist Paul Krugman, a scathing critic of Trump's trade policy, is extremely skeptical and doubts that the deal with benefit either U.S. businesses or U.S. consumers.

In a SubStack article posted on July 29, Krugman attacked Trump's EU and Japan deals — arguing that "there is little sign of a quid pro quo" and warning that although "a 15 percent tariff" is "lower than previously threatened," it is still "vastly higher than we had before Trump."

Krugman continued to lambast Trump's trade deals during an appearance on The New Republic's podcast "The Daily Blast" that was posted the following day. Describing the EU deal as a "sham," the economist and former New York Times columnist stressed that no good will come from a 15 percent tariff imposed on EU goods imported to the U.S.

Krugman told host Greg Sargent, "It means that anybody bringing European goods into the United States is going to pay a tax equal to 15 percent of the value. That in itself doesn't tell you who pays it, but there is overwhelming evidence that the great bulk of that is going to be paid by U.S. consumers. Certainly, none of it is being paid by the Europeans…. At the moment, probably, a lot of it is being born by U.S. businesses, which haven't passed it on to consumers. But they will."

Krugman added, "And so, this is a sales tax on a bunch of stuff that American consumers buy."

The EU imports a wide range of products to the U.S., from Italian and Spanish olive oil to French and Portuguese wines to Belgian beer — all of which, both liberal and conservative economists are warning, will be costing American consumers and businesses a lot more.

When Sargent noted that Trump's tariffs will be a "loser" for lower-income consumers, he got no argument from Krugman.

The liberal economist explained, "People with lower income spend a higher share of their income than people with high incomes. There's at least some indication, although this is true more for some of the other tariffs, that the goods that are being hit hard are things that people with lower income spend more on — like basic clothing. And the main thing is, this tariff is part of a package. We're also getting big tax cuts, and the tax cuts are entirely for high-income people. We're getting benefit cuts for low-income people. Put the whole thing together, and this is a huge upward redistribution of income from people who can't afford to lose the money to people who don't need the money.

Listen to The New Republic's full interview with Paul Krugman at this link and read his SubStack article here.

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