Brad Reed
December 17, 2024
RAW STORY
U.S. President-elect Donald Trump delivers remarks at Mar-a-Lago in Palm Beach, Florida, U.S., December 16, 2024. REUTERS/Brian Snyder
Nobel Prize-winning economist Paul Krugman warned on Tuesday that President-elect Donald Trump's promises to the business community could send inflation soaring back upward in the coming years.
Writing in his personal Substack page, Krugman dissected Softbank CEO Masayoshi Son's recent announcement that he plans to invest $100 billion into the United States in the wake of President-elect Donald Trump's victory.
According to Krugman, the Softbank announcement is being vastly overhyped and is almost certain to underdeliver on its CEO's promises.
"As news reports mostly seem to acknowledge, this appears to involve investments Son was already planning to make before the election, which he and Trump are now presenting as a response to Trump. The same thing happened in 2016," he writes.
"Second, that last round of investments turned out miserably. A lot of it went to WeWork. Remember them? Nobody can be sure how many people ended up with new jobs thanks to Son’s money last time, but it probably wasn’t many."
Krugman then pivots to argue that Trump's enthusiasm for the Softbank investment will clash with his other stated priorities.
"We’re now seeing a perfect example of the arithmetic problem I pointed out the other day," he wrote. "Trump wants to reduce the U.S. trade deficit; he also wants to attract more foreign investment into the United States. But he can’t, as a matter of sheer accounting (which, I know, has a well-known globalist/Marxist bias):Trade balance + Net inflows of capital = 0. If more money flows into America, that must mean a bigger, not smaller trade deficit."
Krugman then predicts that a widening trade deficit could lead Trump to pressure the Federal Reserve to drastically slash interest rates, which would likely reignite inflation.
"I don’t think markets are properly pricing in the likely inflationary consequences of Trump’s coming war on arithmetic," he concludes.
'Don't believe him': Conservative warns Trump 'distraction' could destroy U.S. economy
Matthew Chapman
December 17, 2024
Republican presidential nominee and former U.S. President Donald Trump gestures as he speaks during his rally in Saginaw, Michigan, U.S., October 3, 2024. REUTERS/Brendan McDermid
President-elect Donald Trump is planning a huge new array of tariffs on foreign goods, in particular from China, Canada and Mexico — and he argues the charges are a "reciprocal" scheme, raising taxes on other countries' goods in retaliation for taxes they raised on ours.
But "don't believe him," conservative analyst Ramesh Ponnuru warned for The Washington Post.
In truth, said Ponnuru, many of Trump's tariffs weren't in response to anything but his own petty grievances — and, in any case, the whole idea of "reciprocal" tariffs is not as fair or productive as it sounds.
"Trump’s premise — that we practice free trade while other countries tax our products — is false," Ponnuru wrote. "Scott Lincicome, a policy analyst at the libertarian Cato Institute, points out that dozens of countries have lower average tariffs than the United States does. Former senator Patrick J. Toomey (R-PA), writing in the Wall Street Journal recently, noted that Canada, Britain and Europe 'all impose lower taxes on American manufactured goods than the [United States] imposes on comparable imports.'" For instance, the U.S. taxes European trucks at 25 percent, while Europe only taxes U.S. trucks at 10 percent.
Moreover, he wrote, there's history behind that. The U.S. imposed that 25 percent tariff in retaliation for a European tax on U.S. chicken products.
"There are a few takeaways from that history. One is that 'bargaining chip' tariffs have a way of sticking around long after everyone has forgotten their supposed point. Another is that Trump’s enthusiasm for tariffs is not limited to retaliatory ones: When he talked about our high tax on imported trucks in 2018, he was praising it."
The simple fact is, Ponnuru wrote, "the man just likes tariffs" — he doesn't need a real grievance about unfair trade practices to support jacking them up. And that's bad news, as economists almost universally believe Trump's tariff plans are going to skyrocket the prices of energy and consumer goods.
Already, Canadian officials are threatening to cut off their oil to our markets.
The issue of whether tariffs will truly enrich our country and make the balance of trade fairer "is something nearly all economists doubt, but that’s a debate we can have," Ponnuru concluded. On the other hand, he said, "'Reciprocity' is a distraction: Trump doesn’t take it seriously — and neither should anyone else."
Matthew Chapman
December 17, 2024
Republican presidential nominee and former U.S. President Donald Trump gestures as he speaks during his rally in Saginaw, Michigan, U.S., October 3, 2024. REUTERS/Brendan McDermid
President-elect Donald Trump is planning a huge new array of tariffs on foreign goods, in particular from China, Canada and Mexico — and he argues the charges are a "reciprocal" scheme, raising taxes on other countries' goods in retaliation for taxes they raised on ours.
But "don't believe him," conservative analyst Ramesh Ponnuru warned for The Washington Post.
In truth, said Ponnuru, many of Trump's tariffs weren't in response to anything but his own petty grievances — and, in any case, the whole idea of "reciprocal" tariffs is not as fair or productive as it sounds.
"Trump’s premise — that we practice free trade while other countries tax our products — is false," Ponnuru wrote. "Scott Lincicome, a policy analyst at the libertarian Cato Institute, points out that dozens of countries have lower average tariffs than the United States does. Former senator Patrick J. Toomey (R-PA), writing in the Wall Street Journal recently, noted that Canada, Britain and Europe 'all impose lower taxes on American manufactured goods than the [United States] imposes on comparable imports.'" For instance, the U.S. taxes European trucks at 25 percent, while Europe only taxes U.S. trucks at 10 percent.
Moreover, he wrote, there's history behind that. The U.S. imposed that 25 percent tariff in retaliation for a European tax on U.S. chicken products.
"There are a few takeaways from that history. One is that 'bargaining chip' tariffs have a way of sticking around long after everyone has forgotten their supposed point. Another is that Trump’s enthusiasm for tariffs is not limited to retaliatory ones: When he talked about our high tax on imported trucks in 2018, he was praising it."
The simple fact is, Ponnuru wrote, "the man just likes tariffs" — he doesn't need a real grievance about unfair trade practices to support jacking them up. And that's bad news, as economists almost universally believe Trump's tariff plans are going to skyrocket the prices of energy and consumer goods.
Already, Canadian officials are threatening to cut off their oil to our markets.
The issue of whether tariffs will truly enrich our country and make the balance of trade fairer "is something nearly all economists doubt, but that’s a debate we can have," Ponnuru concluded. On the other hand, he said, "'Reciprocity' is a distraction: Trump doesn’t take it seriously — and neither should anyone else."
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