Nobel Prize-winning economist Paul Krugman warned Sunday that President Donald Trump is handing China what it wants as the nations negotiate the beginning of the end of a trade war that cost the American public billions of dollars.
“However Trump may try to spin this, he lost,” Krugman, a columnist for The New York Times, explained in a series of tweets. China learned, as did North Korea, that “Trump talks loudly but carries a small stick, and can be rolled,” he noted.
Trump has declared that the U.S. is close to reaching a “Phase One” agreement with China. The deal is not yet finalised, nor have details been released.
But Krugman argues that China “hung tough” and is “basically ending up” where it started — buying American agricultural products while continuing to sell “increasingly sophisticated” manufactured goods to the U.S.
Key victims of the Trump’s trade war with China, meanwhile, have been American consumers because “despite many, many false claims by Trump,” they were stuck paying massive tariffs imposed on Chinese imports by the president, Krugman noted.
In addition, a gargantuan bailout for American farmers hit by retaliatory tariffs in Trump’s trade war is also being shouldered by U.S. consumers. The aid — likely to hit $28 billion over two years — was not offered to any other American industry hurt by the trade war, only a segment of the population credited with Trump’s presidential victory. The bailout is twice the size of the 2009 auto industry bailout provided by the Obama administration during the recession, Krugman pointed out.
Yet despite the aid, farms are still going under, with bankruptcies up 24% this year.
Even with a “sustained deal” — “which is still far from certain,” Krugman noted, the US will face major fallout from a mismanaged negotiation. “Trump has made us weak, neither trusted by our allies nor feared by our enemies,” Krugman tweeted.
Krugman conceded that a lackluster deal may not hurt Trump politically. “Elections turn not on how good things are, but on whether they’re perceived as getting better,” he pointed out. “This actually gives politicians an incentive to do stupid things for a while, then stop around a year before the election. Sound familiar?”