In a column celebrating the first anniversary of Donald Trump declaring himself "Tariff Man," New York Times columnist and Nobel Prize-winning economist Paul Krugman attempted to explain the president's love of tariffs and noted that the negative economic impact in the past year has surpassed even the worst expectations.
Wryly noting Trump self-identification as "Tariff Man" was a rare occasion of the president telling the truth, Krugman wrote, "At this point I’ve lost count of how many times markets have rallied in the belief that Trump was winding down his trade war, only to face announcements that a much-anticipated deal wasn’t happening or that tariffs were being slapped on a new set of products or countries."
Before getting into Trump's motivation for seemingly arbitrary economic meddling, Krugman took a look at the damaging economic impact.
"A peculiar aspect of the Trump economy is that while overall growth has been solid, the areas of weakness have come precisely in those things Trump tried to stimulate," he wrote. "Remember, Trump’s only major legislative accomplishment was a huge tax cut for corporations that was supposed to lead to a surge in investment. Instead, corporations pocketed the money, and business investment has been falling."
Pointing out that U.S. manufacturing is collapsing at the same time that the trade deficit is growing, the economist stated that the president's critics' worst fears have come true far beyond what they predicted.
"The truth is that even economists who opposed Trump’s tax cuts and tariffs are surprised by how badly they’re working out," Krugman explained. "The most commonly given explanation for these bad results is that Trumpian tariff policy is creating a lot of uncertainty, which is giving businesses a strong incentive to postpone any plans they might have for building new factories and adding jobs."
"So Trump’s trade war is losing, not gaining, support," he continued, before asking, "Nevertheless, Trump persists. Why?"
Pointing out that Trump has never been one to let facts get in the way of his beliefs, the economist suggests the president is less interested in trade policy and more interested in flexing his muscles in an effort to not only show off how powerful he is but also to reward his friends.
"This system worked well for many years. It turned out, however, to be extremely vulnerable to someone like Trump, for whom everything is partisan and expertise is a four-letter word," he wrote. "Trump’s tariff justifications have often been self-evidently absurd — seriously, who imagines that imports of Canadian steel threaten U.S. national security? But there’s no obvious way to stop him from imposing tariffs whenever he feels like it."
"Tariff policy isn’t the only arena in which Trump can practice crony capitalism — federal contracting is looking increasingly scandalous — but tariffs are especially ripe for exploitation. So that’s why Trump is a Tariff Man: Tariffs let him exercise unconstrained power, rewarding his friends and punishing his enemies," he concluded.
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