Paul Krugman Incinerates Trump’s Doomed Economic Agenda
For someone obsessed with deals, Donald Trump can’t seem to make any as president, especially when it comes to trade.
In his Monday New York Times column, Paul Krugman explains that even the two executive orders Trump signed on March 31 amounted to a minor issue of tariff collection, and troublingly, “its content apparently duplicated an act President Obama already signed last year.”
While his most ardent supporters may still believe Trump can magically create jobs at the swipe of a pen, Krugman explains that:
Business seems to have decided that Mr. Trump is a paper tiger on trade: The flow of corporate relocations to Mexico, which slowed briefly while C.E.O.s tried to curry favor with the new president, has resumed. Trade policy by tweet, it appears, has run its course.
Investors seem to have reached the same conclusion: The Mexican peso plunged 16 percent after the election, but since Inauguration Day it has recovered almost all the lost ground.
Oh, and about NAFTA and that “worst deal ever” applause line Trump trotted out at campaign rallies? Krugman reminds us of a draft proposal circulating around Congress last week that was supposed to take a sledgehammer to the trade deal, but on closer inspection only seems to be making “minor tweaks.”
So why is Trump’s trade talk a load of hot air? Krugman lays out two reasons: First, as Krugman writes, “back when Mr. Trump was railing against trade deals, he had no idea what he was talking about. (I know, you’re shocked to hear that.)”
Because he had no idea (or didn’t care to get one), it was easy to scream about China’s currency manipulation, or how the United States apparently never got anything in return from NAFTA, even though, “Mexico drastically cut its tariffs on goods imported from the U.S., in return for much smaller cuts on the U.S. side.”
The second, and perhaps most concerning, reason is that Trump is almost reflexively against trade agreements despite the fact that they’re “deeply embedded in the economy.” The automobile industry is the clearest example:
At this point it makes little sense to talk about a U.S. auto industry, a Canadian auto industry or a Mexican auto industry. What we have instead is a tightly integrated North American industry, in which vehicles and components crisscross the continent, with almost every finished car containing components from all three nations. Does it have to be this way? No. Slap on 30 percent tariffs, and after a few years those national industries would separate again. But the transition would be chaotic and painful.
Sure, China’s growth has had a disruptive effect on jobs and trade, but as Krugman reminds us, “reversing globalization now would produce an equally painful ‘Trump shock,’ disrupting jobs and communities all over again—and would also be painful for some of the big corporate interests that, strange to say, have a lot of influence in this supposedly populist regime.”
This supposedly populist regime couldn’t produce a credible bill on health care, and if current progress, or lack thereof, is any indication, Krugman believes Trump is headed for a similar conclusion on trade. It’s too bad, he writes, that “governing America isn’t like reality TV.”