Paul Krugman Says Trump’s Tariffs Make America More Like Denmark

Trade & Tariffs - Tariffs negatively impact the standard of living by increasing costs and reducing productivity [3][4] - Trump's tariffs, while potentially reducing GDP by approximately 0.5% in the long run, pose a greater threat due to uncertainty and volatility, disrupting business investments [6][7][8] - US businesses, rather than exporters, are absorbing a significant amount of tariff costs, partly due to front-running and uncertainty about the tariffs' permanence [10] - Many tariffs are levied on inputs into US manufacturing, raising costs for US businesses [12] - The auto industry is particularly vulnerable to tariffs due to its integrated North American supply chain, where parts cross borders multiple times [15] - Tariffs function as a sales tax on imported goods, potentially increasing revenue and reducing the deficit, but the amount is unlikely to reach Secretary Besson's estimate of $300 billion [18][19][20] - The US is violating international trade agreements, damaging its credibility and potentially dismantling a system built over 90 years [22][23] Immigration & Labor - Immigrant workers are concentrated in specific industries and occupations that complement native-born American workers, and driving them out reduces productivity and living standards [4][5] - Industries that might return to the US are likely to be capital-intensive, creating more jobs for robots than for US workers [18] Economic Policy & Impact - The stated goal of bringing back manufacturing jobs may not be achieved due to automation and the integrated nature of industries like the auto industry [14][16]