Nobel economist lays out '3 types of lasting damage' from Trump's economic 'rampage'

When Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent are interviewed by friendly media outlets, they typically argue that President Donald Trump's steep new tariffs will create enormous prosperity in the United States.

But liberal economist Paul Krugman has a very different view.

In a Substack column posted on October 30, Krugman warns that even if Trump abandoned his protectionist trade policy, the U.S. economy would suffer long-lasting damage.

"A little over six months ago," Krugman explains, "Donald Trump shocked the world by announcing a huge jump in tariffs to levels not seen since the 1930s. Most of these tariffs were clearly illegal and have been so ruled by lower courts — but it's anyone's guess how an extremely submissive Supreme Court will rule. Since then, he has backed off some tariffs but imposed others, some on bizarre grounds — a Canadian province ran an ad he didn't like! — creating constant uncertainty."

Krugman goes on to identify "three types of economic damage" that "Trump's chaotic tariff policies" have inflicted: (1) "higher prices for American producers and consumers," (2) "economic uncertainty," and (3) "the global loss of American credibility."

"Even if the worst in terms of prices and uncertainty is over," Krugman argues, "it's clear that Trump's tariffs have inflicted lasting damage on the U.S. economy as well as the global economic order."

During the United States' 2024 presidential race, Trump attacked then-President Joe Biden and then-Vice President Kamala Harris relentlessly on inflation — which he promised to lower "on Day 1" if he returned to the White House.

But Krugman laments that prices are going up, not down, during Trump's second presidency.

"Inflation has accelerated since Donald Trump went on his tariff rampage," the liberal economist warns. "Late last year, before Liberation Day and all that, professional forecasters expected 'core' consumer prices — which exclude volatile food and energy prices — to rise 2.4 percent over the course of 2025. The latest official reading, and the last we may get for a while, put core inflation at 3 percent. More direct evidence comes from the Pricing Lab, which relies on retail prices posted online — something we need to do while the shutdown lasts, and maybe afterwards if Trump corrupts the official statistics."

Krugman continues, "I've used their data before. They show a significant bump in the prices of imported goods, especially compared with their declining trend BT (before Trump). In a new paper, the Pricing Lab analyzes its data and estimates that the Trump tariffs have raised overall consumer prices by 0.7 percent."

Paul Krugman's full Substack column is available at this link.