Paul Krugman’s departure left a huge hole in the NYT

Fortunately for those of us who have a slippery grasp of worldwide economics but know it’s important to understand it, Paul Krugman is now publishing what he wants to say, how he wants to say it and when he wants to say it on Substack. You can sign up for different versions; a yearly subscription is $70 but I selected a starter version: some free essays in my e-mailbox, which arrive virtually every day.

Good thing because…tariffs? Geez did I need Krugman to verify my inner sense that they are stupid and crazy.

I’ve pulled some choice selections from Krugman’s exegesis on these things called tariffs (the title is “The End of America”) just in case you’ve got a hole in your heart where Paul Krugman’s Times columns used to be. I don’t think he’ll mind. (I’ve bolded a couple of things that are Pure Krugman — everything I love him for, aside from his unique gift at explaining inexplicable things to me.)

I’ve been saying for a while that markets were far too complacent about Trump’s threat to impose tariffs on Canada and Mexico, believing that he wouldn’t follow through because it’s such a stupid, self-destructive idea.

But yeah, Trump did the stupid thing. Here’s an excerpt from Krugman’s excerpt of the NYT report from the White House’s new, very blonde and expectedly feeble press secretary:

Ms. Leavitt said the president had chosen to impose tariffs because the three countries “have all enabled illegal drugs to pour into America.”

“The amount of fentanyl that has been seized at the southern border in the last few years alone has the potential to kill tens of millions of Americans,” she said. “And so the president is intent on doing this.”

Back to Krugman:

I think you have to see “fentanyl” in this context as the equivalent of “weapons of mass destruction” in the runup to the invasion of Iraq. It’s not the real reason; Canada isn’t even a major source of fentanyl. It’s just a plausible-sounding reason for a president to do what he wanted to do for other reasons — George W. Bush wanted a splendid little war, Donald Trump just wants to impose tariffs and assert dominance.

Also, although I’m not sure such things matter anymore, what’s the legal basis for these tariffs? U.S. trade law gives the president huge discretion to impose tariffs, but only for a specific set of reasons: economic injury from import surges (Section 201), national security (Section 232), unfair foreign competition (Section 301), dumping — sales below costs. Drug smuggling, especially imaginary drug smuggling, isn’t on the list.

The president can impose tariffs much more broadly if he declares a national economic emergency. But has he done that? Does 2.6 percent inflation and 4.1 percent unemployment sound like an economic emergency to you? And even if Trump gets around to declaring an economic emergency, what does fentanyl have to do with it?

As far as I can tell, there’s a real possibility that Trump’s new tariffs will face a court challenge, and that he will lose. I’m not an expert on trade law, but I do know a bit, and this looks flatly illegal to me.

But even if these tariffs are blocked, or Trump finds some way to declare victory and call them off, the damage will be immense.

As I wrote the other day, in the three decades since NAFTA went into effect, North American manufacturing has evolved into a highly integrated system whose products — autos in particular, but manufactured goods more broadly — typically contain components from all three members of the pact, which may be shipped across the borders multiple times. Manufacturers developed this system not just because tariffs were low or zero, but because they thought they had a guarantee that tariffs would stay low.

One way of saying this is that until just the other day there was really no such thing as U.S. manufacturing, Canadian manufacturing or Mexican manufacturing, just North American manufacturing — a highly efficient, mutually beneficial system that sprawled across the three nations’ borders.

But now we have a U.S. president saying that a duly negotiated and signed trade pact isn’t worth the paper it was printed on — that he can impose high tariffs on the other signatories whenever he feels like it. And even if the tariffs go away, the private sector will know that they can always come back; the credibility of this trade agreement, or any future trade agreement, will be lost. So North American manufacturing will disintegrate — that is, dis-integrate — reverting to inefficient, fragmented national industries.

Hence my title, “The end of North America.”

And to think that many people imagined that Trump would be good for business.

Well, gee. I seem to have “excerpted” and bolded quite a lot. Do me a favor and sign up for his newsletter so I don’t have to do this again.

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