Latest news with #Krugman
Indian Express
16 hours ago
- Business
- Indian Express
What Trump America needs to understand: A country is not a corporation
Several years ago, Nobel-Prize-winning economist Paul Krugman wrote an insightful article, 'A Country is not a Company', in which he argued that business leaders need to understand the difference between economic policy on the national and international scale and business strategy on the organisational scale. In other words, and to put it bluntly, CEOs who do not understand economic policy are ill-suited for the role. Little did many realise, including perhaps Krugman himself, that an article written in 1996 would command such resonance almost three decades on. After all, CEOs of firms that have enjoyed unbridled monopoly power — especially after the emergence of the modern corporation around the turn of the last century — have shown more than a passing tendency to use that market power to their advantage. Examples abound from Standard Oil, Exxon Corporation, IBM, Microsoft, and, more recently, big-tech companies to name a few. Firms engaged in market-based competition play a 'zero-sum game' — one gains at the expense of the other. Disciplining errant firms has been accomplished by a combination of market creativity and intervention of anti-trust authorities, but it has been a hard task. Do nations jostle for competitive advantage on the global stage the same way that firms do locally? Krugman thinks not. International trade, significantly, is not a zero-sum game. According to him, 'If the European economy does well, it need not be at US expense; indeed, if anything a successful European economy is likely to help the US economy by providing it with larger markets and selling it goods of superior quality at lower prices.' Historically, that has been the case for all economic development, and most recently in East Asia. Global interdependence and the emergence of deeply integrated value chains are proof that trade increases the size of the global economic pie. The whole point of modern trade is not to impoverish either partner(s), it is to enrich both; or else why trade at all? Colonists engaged in coercive trade; today's trade is entirely voluntary. A popular phrase attributed to George Mallory, a British mountaineer of the 1920s, captures the core motivation behind mountaineering. Why do people climb mountains? 'Because they are there,' he is famously believed to have retorted. Monopolies exploit their power because it's there; CEOs have the clout along with the capacity to get away with it. Doing the same as a country — that is, flexing muscles on the global economic stage because you have power — is entirely different. Because modern trade is a matter of choice, no one holds a gun to and forces nations to trade. Blaming 'unfair' foreign competition, therefore, for trade deficits as Donald Trump has been relentlessly doing, is politically expedient but economically disingenuous. Are trade deficits the right measure of a country's competitiveness? Krugman ponders that competitiveness cannot simply be measured by staring at trade balances and their changes. If you do that, the implications are quite dangerous — they lead to harmful steps like trade wars to promote so-called competitiveness. Trade wars often make the situation worse. Evidence of the recent madness emanating from the US in the form of tariff impositions on countries that it runs a deficit with shows that contrary to expectations, the tariffs actually weakened the US dollar. It lost nearly 10 per cent of its value since January, with over half the decline in April. The tariffs also disrupted the bond market by triggering a sell-off in the US treasuries, spiking yields and challenging its safe-haven status. This volatility forced a temporary tariff pause, highlighting the bond market's power. Interestingly, on May 28, the US Court of International Trade struck down Trump's 'Liberation Day' tariffs, ruling that they exceeded presidential authority under the International Emergency Economic Powers Act (IEEPA) of 1977. According to the verdict, these tariffs involved significant economic and political issues, requiring explicit congressional authorisation, which was absent. Poignantly, on the same day, Elon Musk officially quit his advisory role in the US administration, concluding his tenure at the Department of Government Efficiency. Even so, looming on the US horizon are inflation, recession and policy unpredictability. The Trump administration has already appealed the decision (it has been stayed by the appellate court) and the case may progress to the US Supreme Court, by which time data on the impact on the US trade deficit will be available. Economists refer to this lag as 'the J-curve effect', reflecting a nuance where financial markets adjust almost instantaneously to shocks, while goods markets adjust with a lag. In all likelihood, with the tariff retaliations we have witnessed from China, Canada, and Mexico among others, the US trade deficit could become worse. Own goal, anyone? Besides, the Triffin thesis suggests that the US must run trade deficits to provide the necessary dollars for global liquidity. So, if the US wishes to remain the hegemon and continue to enjoy the exorbitant privilege of printing dollars and importing goods and services for a song, it will need to run deficits. In fact, since 1971 when the US dollar was brusquely decoupled from gold by President Richard Nixon (the so-called 'Nixon shock'), effectively ending the gold standard and the Bretton Woods system, the US dollar has continued to meet the bulk of the global demand for liquidity. In only two years since 1973 has the US trade balance been positive. In this half-century, the US has been a most productive nation, innovation-intensive, 'competitive' and creative, enterprising and illustrious, all achieved in the presence of growing trade deficits. Blaming trade deficits for unemployment and low wages is therefore ineffective and, in many cases, unequivocally wrong, especially when they are caused by domestic factors. The US is a services-based economy — education, insurance, healthcare, banking, real estate, information technology, among other sectors contributing almost 80 per cent of GDP. Getting manufacturing back by erecting tariff walls is a futile scheme, destined to fail. The CEO of a country running economic policy must, therefore, distinguish between politically expedient rhetoric and the harms of making policy decisions based on careless arithmetic. The existence of trade deficits (or surpluses) reflects a complex interaction of many factors, especially for a country that provides global liquidity. These need to be understood clearly. Krugman's warning and the embedded advice, therefore, must be taken seriously, above all by the country that nurtured his clarity of thought. (The writer is dean, School of Humanities and Social Sciences at Shiv Nadar University, and professor of Economics. Views are personal)
Yahoo
3 days ago
- Business
- Yahoo
Paul Krugman warns of a greater than 50% chance of recession - 3 easy ways to protect your nest-egg
Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. Paul Krugman isn't one to mince words. The Nobel Prize-winning economist says President Donald Trump's policies are doing serious damage to the U.S. economy — calling them 'crippling' in some cases and a direct threat to what once made America exceptional. In an interview with Bloomberg Talks on April 8, Krugman blasted the Trump administration's sweeping layoffs at federal health agencies. Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how BlackRock CEO Larry Fink has an important message for the next wave of American retirees — here's how he says you can best weather the US retirement crisis Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10) 'The CDC is laying off medical scientists so fast that samples are being left in research with nobody to look after them,' he said. 'And since ultimately U.S. technological progress relies a lot on the spillovers from government research, we're actually crippling — [making] America not great again.' Krugman also criticized Trump's constantly shifting tariffs, arguing that they've created a climate of deep uncertainty — and that alone is enough to hurt the economy. '[We've] never had a situation where you have no idea where the average tariff rate is going to be a few months from now,' Krugman said. 'This creates an impossible environment for business. It's hard to imagine a worse trade policy than what we're getting.' Echoing other economists, Krugman believes that tariffs could drive up inflation and drag down growth — but given the unpredictability of Trump's policy changes, he says the short-term impact could be even worse. 'We may very well now think better than even odds that we are going to have a recession this year,' he warned. While Trump insists that 'tariffs are about making America rich again and making America great again,' Krugman argues his implementation of them is having the opposite effect. 'If you wanted to kill U.S. exceptionalism, this is kind of what you would do,' he said. The U.S. hasn't entered a recession, but with markets reacting to trade policy shifts, investors may want to prepare. If you're concerned about what's next, here are three easy ways to protect your nest egg now. While stocks have taken a hit in the wake of sweeping tariffs, one asset has emerged as a bright spot: gold. Often seen as the ultimate safe haven, gold isn't tied to any one country, currency or economy. It can't be printed out of thin air like fiat money, and in times of economic turmoil or geopolitical uncertainty, investors tend to pile in — driving up its value. Ray Dalio, founder of the world's largest hedge fund, Bridgewater Associates, recently highlighted gold's role in a resilient portfolio. 'People don't have, typically, an adequate amount of gold in their portfolio,' Dalio told CNBC in February. 'When bad times come, gold is a very effective diversifier.' Over the past 12 months, gold prices have surged by around 35%. Those looking to incorporate precious metals into their retirement strategy can benefit from modern investment solutions, like those offered by companies like American Hartford Gold. American Hartford Gold is a leading precious metals dealer – allowing you to invest directly in gold or silver. With secure storage, expert guidance, and customizable investment plans, American Hartford Gold helps investors diversify their portfolios while protecting against inflation. Gold IRAs provide a tangible safeguard for retirement savings, combining financial security with significant tax advantages, making them an appealing choice for long-term wealth preservation. Read more: You're probably already overpaying for this 1 'must-have' expense — and thanks to Trump's tariffs, your monthly bill could soar even higher. Like stocks, real estate has its cycles, but it doesn't rely on a booming market to generate returns. Even during a recession, high-quality, essential real estate can continue to produce passive income through rent. In other words, you don't have to wait for prices to rise to see a payoff — the asset itself can work for you. It's also a time-tested hedge against inflation. As the cost of materials, labor and land rises, property values often increase as well. At the same time, rental income tends to climb, giving landlords a revenue stream that adjusts with inflation. That said, owning a rental property isn't exactly as passive as it sounds. Between finding tenants, collecting rent, covering repairs and saving for a down payment, being a landlord takes time — and money. The good news? These days, you don't need to buy a property outright to benefit from real estate investing. For accredited investors, Homeshares gives access to the $36 trillion U.S. home equity market, which has historically been the exclusive playground of institutional investors. With a minimum investment of $25,000, investors can gain direct exposure to hundreds of owner-occupied homes in top U.S. cities through their U.S. Home Equity Fund — without the headaches of buying, owning or managing property. With risk-adjusted target returns ranging from 14% to 17%, this approach provides an effective, hands-off way to invest in owner-occupied residential properties across regional markets. Another option is First National Realty Partners (FNRP), which allows accredited investors to diversify their portfolio through grocery-anchored commercial properties without taking on the responsibilities of being a landlord. With a minimum investment of $50,000, investors can own a share of properties leased by national brands like Whole Foods, Kroger and Walmart, which provide essential goods to their communities. Thanks to Triple Net (NNN) leases, accredited investors are able to invest in these properties without worrying about tenant costs cutting into their potential returns. Simply answer a few questions — including how much you would like to invest — to start browsing their full list of available properties. When markets turn volatile and uncertainty looms, it can be difficult to know what moves to make — or whether to make any at all. That's where a trusted financial advisor can make a big difference. A good advisor doesn't just help you pick stocks. They take the time to understand your unique goals, time horizon and risk tolerance — then help you build a diversified portfolio that fits your life, not just the market cycle. With Vanguard, you can connect with a personal advisor who can help assess how you're doing so far and make sure you've got the right portfolio to meet your goals on time. Vanguard's hybrid advisory system combines advice from professional advisers and automated portfolio management to make sure your investments are working to achieve your financial goals. All you have to do is fill out a brief questionnaire about your financial goals, and Vanguard's advisers will help you set a tailored plan, and stick to it. Once you're set, you can sit back as Vanguard's advisors manage your portfolio. Because they're fiduciaries, they don't earn commissions, so you can trust that the advice you're getting is unbiased. Access to this $22.5 trillion asset class has traditionally been limited to elite investors — until now. Here's how to become the landlord of Walmart or Whole Foods without lifting a finger Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Are you rich enough to join the top 1%? Here's the net worth you need to rank among America's wealthiest — plus a few strategies to build that first-class portfolio This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Yahoo
14-05-2025
- Business
- Yahoo
Canada and China share some 'advantages' in tariff war with U.S., says Nobel economist
Canada has some powerful cards to play in its tariff fight with United States President Donald Trump, says a Nobel Prize-winning economist. 'Canada has some of the advantages that China has' in the sense of being able to deny the U.S. access to critical commodities, Paul Krugman said during a podcast interview with Avery Shenfeld, CIBC World Market's chief economist. Prior to China and the U.S. agreeing to a 90-day cooling period on trade tensions earlier this week, the former said it would cut off exports of rare earth minerals and other critical 'industrial inputs' after the latter hiked tariffs on Chinese goods to 145 per cent. A similar tactic is available to Canada, Krugman said, given that its trade surplus with the U.S. is mostly due to energy exports, including oil and hydroelectricity. 'It's a lot easier for Canada to try to compensate people who have lost jobs because of a loss of access to U.S. markets than it is for the United States to replace the oil to Midwestern refineries and the electricity to the New England power grid,' he said. But Canada has weak spots, too. 'Canada is peculiarly vulnerable,' Krugman said. 'Canada is a big country geographically, but almost everybody lives close to the U.S. border. I sometimes say Canada is closer to the United States than it is to itself.' The economist, who has a global profile and has worked at several top-tier U.S. universities, including the Massachusetts Institute of Technology and Princeton, said Canadian provinces have in most cases oriented their trade to the U.S. because they are closer to that market. Many states are also economically larger than provinces in Canada, he said, citing the example of British Columbia turning to California to trade rather than a more distant and smaller Ontario. 'It's difficult for Canada to reorient itself,' but 'not impossible,' Krugman said, suggesting that Eastern Canada could redirect trade to Europe while Western Canada could turn toward Asia, though doing so would be difficult and costly. Prime Minister Mark Carney has talked about expanding commerce with other countries. 'Canada must be looking elsewhere to expand our trade, to build our economy and protect our sovereignty,' he said during a press conference on April 3. In response to Trump's tariffs and threats to Canada's sovereignty, there is also a major push by the new federal government to break down interprovincial trade barriers. Carney on Tuesday named Dominic LeBlanc as minister of Canada-U.S. trade, intergovernmental affairs and 'One Canadian Economy,' with the goal of removing federal impediments to interprovincial commerce by July 1. But Krugman said there are currently no other options available other than the U.S. for some sectors of Canada's economy such as the oilsands. 'Oil from the tarsands really has no outlet except the U.S. Midwest. On the other hand, the U.S. Midwest doesn't have a great alternative to Canadian tarsands oil,' he said. Another example is that neither Quebec nor New England has alternatives in terms of exporting and receiving hydropower. The U.S. receives 97 per cent of Canada's crude oil exports, according to the Canada Energy Regulator, with about 60 per cent of it destined for Midwest refineries and the remainder going to the Gulf Coast, West Coast and East Coast. On the hydro front, New England — which includes the states of Maine, Vermont, New Hampshire, Connecticut, Massachusetts and Rhode Island — accounts for about half of Hydro-Quebec's exports. Trump keeps saying the U.S. doesn't need Canada's stuff. We asked experts if he's right Terence Corcoran: Elbows up for a trade deal by anti-free-traders Looking ahead, Krugman is worried that businesses' inhibition to invest in North America could persist even if Trump drops his tariffs. 'In terms of U.S. policymaking, a solemn treaty is basically a suggestion, not a contract,' he said. • Email: gmvsuhanic@ Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
14-05-2025
- Business
- Yahoo
Continental Divide
Largely unnoticed by the general public on both sides of the Atlantic Ocean is a particular way America has pulled away from Europe: The average American is now vastly more affluent than the average European. The difference is not only reflected in the overall sizes of their respective economies but by the much more practical metrics of disposable income, living space, and accessibility to basic services. Despite the overwhelming evidence, though, the idea that Americans are better off than their European counterparts is an unpopular sentiment. I casually mentioned on a recent episode of Paul Krugman's interview show that, whereas both continents were similarly affluent a few decades ago, America is now nearly twice as rich as Europe. Cue a flood of outraged emails. The strength of this reaction may have had something to do with Krugman's audience, which skews progressive and American. But I've had similar reactions from very different audiences in the past. When I cited the same stat to a center-right member of the European Parliament a few months ago, he insisted that such stats just weren't meaningful; in all of the metrics of life quality that truly mattered, such as disposable income and access to good housing, Europeans were surely doing at least as well as Americans. But they are not. In the decades immediately before and after the turn of the millennium, the United States and the richest large countries in Europe, such as Germany and the United Kingdom, were similarly affluent. In 1995, Germany's GDP per capita was a little higher ($32,000) than that of the United States ($29,000), with the United Kingdom lagging behind at a noticeable distance ($23,000). By 2007, at the cusp of the Great Recession, the order had slightly changed: Britain was now in the lead ($50,000), with the United States ($48,000) and Germany ($42,000) following closely behind. Today, to an extent that few people on either continent have fully internalized, a significant economic gulf separates America and Europe. On average, Americans are now nearly twice as rich as Europeans. According to the latest available data for GDP per capita, for example, the United States now stands at $83,000, with Germany at $54,000 and the United Kingdom at $50,000, enjoying a markedly smaller income. The contrast to less affluent European countries is even more striking. The GDPs per capita of France ($45,000), and Italy ($39,000) have fallen to about half that of the United States. Portugal ($27,000), Greece ($23,000), and Poland ($22,000) are less than one-third that of the United States. GDP per capita is, of course, vulnerable to many of the critiques made by those who are skeptical of the great economic divergence. If America is vastly less equal than Germany or the United Kingdom, then it is indeed possible that the lion's share of that economic pie is captured by a very small number of people; in that case, America's greater GDP simply wouldn't translate into notably more affluence for the average person. The problem with this seemingly plausible explanation is that it doesn't hold up to empirical scrutiny. America is indeed somewhat more unequal than Europe. But the difference is not nearly as stark as some people on both sides of the continent seem to assume. Indeed, the GINI coefficient (a standard metric economists use to measure inequality) for the United States, at 0.39, is only modestly higher than that of Britain, at 0.36, and only moderately higher than that of Germany, at 0.29. As a result, metrics that aren't skewed by outsized wealth at the top, like household income at the median, still show a vast divergence between the two continents. According to official figures for median disposable income, for example, the continents remain quite far apart. These figures aren't influenced by outliers at the top; colloquially, we might therefore say that they represent a typical income. They also account for both the taxes that citizens pay and the transfer payments they receive from the state; they thus reflect the fact that European countries tend to redistribute more between their citizens. According to the Organization for Economic Cooperation and Development, the median disposable income in 2023 was $51,000 in the United States, $39,000 in Germany, and $33,000 in the United Kingdom. That's a lot of numbers about income. And that makes it easy to imagine, as I think a lot of skeptics about the great divergence do, that they somehow don't translate into things that are actually important for people's everyday lives. Sure, this argument goes, if you make a lot less money, you might find it hard to compete for certain goods whose prices are indexed to a global market. If your heart is set on a vintage Rolex or a Ferrari supercar, much richer buyers from the United States or China might be able to price you out of the market. But when it comes to living in a nice apartment or going out to a delicious restaurant, the comparison between your wage and that of people in faraway countries matters much less; so perhaps Europeans are just as able to afford those crucial amenities. To test this hypothesis, I tried to compile a lot of data about day-to-day material amenities. How spacious are the houses and apartments of people on each side of the Atlantic? How often can they afford to eat out or to order takeout? And what kind of digital goods can they afford to access? Let's start with housing. Since home prices are very expensive in the United States, many Americans might imagine that Europeans can afford to live in nicer apartments despite their nominally lower incomes. But the figures paint a different picture. The average home size in the United States is about 2,200 square feet. In Germany, it is 1,200 square feet. In the United Kingdom, it is 800 square feet. This extra space translates into all kinds of everyday amenities: Americans, for example, have about double the number of bathrooms per resident, enjoy much bigger refrigerators, and are much more likely than Europeans to have a dryer or a dishwasher in their home. Dining out tells a similar story. The numbers are a little less exact, but estimates suggest that Americans eat out at a restaurant, have food delivered to their home, or order takeout about twice a week on average. According to a 2022 Gallup poll focusing exclusively on takeout food, for example, about 3 in 5 Americans say that they order food for pickup at least several times a month. Eating out is far less common in Europe, where there is a smaller number of restaurants per capita, and the percentage of income people are able to devote to eating out is significantly lower. These differences in standard of living are even evident in many aspects of the digital economy. The United States and the United Kingdom both have about 80 personal computers per capita, for example (making this one of the rare metrics on which Britain has kept up with its former colony). But Germany has only 66 computers per capita, with countries like Italy (37) and Poland (17) even further behind. The discrepancy is even more striking regarding the most basic currency of the digital age: access to the internet. According to Data Pandas, the median speed of a broadband connection in the United States is currently estimated at 280 Mbps. In Britain, it is 136 Mbps. In Germany, it is 96 Mbps. Of course, there's more to life than being materially rich. Europe is a beautiful continent. Most Europeans make a perfectly comfortable living. Many are deeply embedded in thick networks of community, which benefit from a high level of mutual trust. They live in vibrant cities with beautiful buildings and a strong sense of history. There is a reason social media posts that highlight the appeal of a European lifestyle regularly go mega-viral. Indeed, to most people—including me—many other things are far more important. As someone who grew up in Europe, I myself feel the continent's pull. I have happily lived in England in the past, love Paris, and at least once a week fantasize about permanently moving to Italy. It is also true that America's economic model has significant drawbacks. Thanks to a more generous welfare state and stronger community ties, the poorest Europeans probably fare better than do the poorest Americans. And of course, there are unique annoyances and indignities that even comparatively affluent Americans suffer. For the most part, for example, I receive much better medical care in the United States than I ever have in Europe—but every time I have to deal with the insurance industry, I wonder whether the increase in quality is worth the increase in stress. Americans have some good reasons to keep indulging their fantasies of living Under the Tuscan Sun or following in the footsteps of Emily in Paris. And Europeans can rightfully remain proud of the unique beauty found in places like Berlin or Lisbon or Siena as compared to a typical American suburb. But it is possible to maintain this preference without denying the reality that Europe has suffered significant economic decline relative to the United States, and that this is now having serious consequences for ordinary people. Indeed, it is striking that my American friends who dream of moving to Europe usually do so because they can telework for U.S. companies or are about to retire; my European friends who dream of moving to the United States, by contrast, do so because they are frustrated by a lack of economic opportunities and recognize that they don't have an adequate outlet for their talents. When a development as striking as the economic divergence between Europe and America is so little known or discussed by the broader public, the reason is usually that it discomfits all kinds of other narratives. That is clearly true in this case: Europeans and Americans, the left and the right, each have reasons of their own to ignore or downplay this fact. Europeans don't like to recognize how far they have fallen behind the globe's economic leaders. Meanwhile, Americans on all sides of the political spectrum have become so consumed with the negativity bias of social media that they don't want to see any good news about their own country. The American left is an obvious example, as it is more singularly focused on the inadequacies of the welfare state and the legacy of 'structural racism.' Acknowledging that, wealth inequality and the disparity between different ethnic groups notwithstanding, the average African-American is now richer than the average European would seem like sacrilege to many progressives. But even on the American right, many have now become convinced that the global system built by America has turned to its disadvantage. They see the country, as President Donald Trump did in his first inaugural address, as the land of American carnage, with 'mothers and children trapped in poverty in our inner cities [and] rusted-out factories scattered like tombstones across the landscape of our nation.' But for all of America's problems, what's truly striking about the last decades is just how successful the United States has been. As China rose and Europe's share of global GDP cratered, America's share held up astonishingly well. As a result, two regions that were once similarly affluent have undergone a remarkable divergence: gradually but seemingly inexorably, America has become vastly richer than Europe.
Newsweek
25-04-2025
- Business
- Newsweek
US Recession Seems Likely, Nobel-Winning Economist Says
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Nobel Prize-winning economist Paul Krugman warns that President Donald Trump's unpredictable tariff policies—including imposing and pausing various tariffs as well as changing rates—make a U.S. recession seem "likely." Newsweek has reached out to Krugman for further comment via email on Friday. Why It Matters President Donald Trump largely campaigned on economic and immigration policies, pledging to levy numerous tariffs and increase U.S. manufacturing, as well as cracking down on illegal immigration. Trump's tariffs and shakeup of global trade has rattled global and domestic markets, with Wall Street tanking over the past month, marking the worst days for the U.S. stock markets since 2020. Markets later surged after Trump paused a broad set of retaliatory tariffs, but many businesses and consumers remain in limbo as the current economic policy remain uncertain. Krugman's latest warning, which has been echoed by leading financial institutes, highlights the risk that policy volatility could tip the country into an economic downturn. Many economists, financial firms, Democrats, and some Republicans have warned that Trump's tariff policy would spark a recession, while the Trump administration has not ruled out the possibility, noting the transition period will be marked with some market "disruption." What To Know Krugman, who won the Nobel Prize in economic sciences in 2008, said during an April 23 episode of a Goldman Sachs podcast that Trump's tariff policy, and the way it has been delivered, is introducing severe uncertainty into the business environment. "There has been nothing like this," Krugman said, adding "the story keeps changing." Krugman has been critical of Trump's policies in the past and warned ahead of the 2024 election that the Republican nominee's economic policies would cause "economic chaos." The economist noted that what's ironic about his prediction of a likely recession is "this is not the tariff," as a "stable tariff rate would not cause a recession, but an unpredictable tariff rate that can change the next day is really a depressing effect on demand." Krugman further noted "the secret sauce of the Trump tariffs is that they are extremely uncertain. Nobody knows what they will be. Nobody knows what comes next." Paul Krugman, Nobel laureate in Economics, Distinguished Professor at the Graduate Center, CUNY, and New York Times columnist discussion with Mayor de Blasio participates (not seen) on social and economic inequality with in Paul Krugman, Nobel laureate in Economics, Distinguished Professor at the Graduate Center, CUNY, and New York Times columnist discussion with Mayor de Blasio participates (not seen) on social and economic inequality with in Louise Wateridge / Pacific Press/SIPA/ AP Images Trump has repeatedly announced, imposed, paused and reimposed a series of blanket, sectoral and retaliatory tariffs. Notably, just hours after sweeping, retaliatory tariffs went into effect on April 9, he paused the majority of them. Krugman noted that these conditions are impacting business investment, consumers, and homebuilders, among others, which "is the reason why a recession seems likely." He later noted that he doesn't expect the recession to be "severe," however he noted that "if consumer spending falls off a cliff, yeah, then it can become a severe recession." Trump has urged Americans to "hang tough" amid market volatility and the announcement of reciprocal tariffs by other countries, including China. What People Are Saying Ray Dalio, founder of Bridgewater Associates said during a recent NBC interview: "I think that right now we are at a decision-making point and very close to a recession, and I'm worried about something worse than a recession if this isn't handled well." "Such times are very much like the 1930s. I've studied history, and history repeats over and over again," Dalio added. "If you take tariffs, if you take debt, and the rising power challenging an existing power, and those factors—those changes in the orders, the systems—are very, very disruptive. How that's handled could produce something that's much worse than a recession, or it can be handled well." Economist Torsten Slok said in a Monday appearance on CNBC that there will "absolutely" be a recession in 2025 if tariffs "stay at these levels." President Donald Trump said in an April Truth Social post: "THIS IS AN ECONOMIC REVOLUTION, AND WE WILL WIN. HANG TOUGH, it won't be easy, but the end result will be historic. We will, MAKE AMERICA GREAT AGAIN!!!" Vice President JD Vance said in an X post earlier in April: "There is a category of DC insider who wants to fight an actual war with China but also wants China to manufacture much of our critical supply. This is insane. President Trump wants peace, but also wants fair trade and more self-reliance for the American economy." Lin Jian, a spokesperson for the Chinese Foreign Ministry, told reporters earlier in this month: "Tariff and trade wars have no winner. China does not want to fight these wars but is not scared of them. We will not sit idly by when the Chinese people's legitimate rights and interests are the U.S. is determined to fight a tariff and trade war, China's response will continue to the end." Cato Institute Vice President of General Economics Scott Lincicome told CNN: "Markets are relieved a bit, but I don't know how you could possibly think the U.S. is a sound, safe and stable place to invest when the president is flipping tariffs on and off like a light switch and there could be more of these things in a mere 90 days. So a bit of a reprieve, but we're definitely not out of the woods." What Happens Next Trump placed a 90-day pause on dozens of retaliatory tariffs that briefly took effect earlier in April. The administration has said dozens of countries are seeking negotiations with the U.S. Tariffs on China remain intact amid growing tensions.
