Must-Read: Paul Krugman: Oh! What a Lovely Trade War

Must-Read: Well, I’ll make the purist case for free trade: The China shock was a shock. Shocks are bad for those who get hit, and are much, much worse when the overall macroeconomy is not at full employment. Because foreigners don’t vote, blaming trade rather than accepting responsibility is the modal response of politicians to any shock that can be linked to trade in any way. We economists need to push back against that modal political response:

Paul Krugman: Oh! What a Lovely Trade War: “I’m not making a purist case for free trade here… https://www.nytimes.com/2017/07/03/opinion/trump-trade-war.html?_r=0

…Rapid growth in globalization has hurt some American workers, and an import surge after 2000 disrupted industries and communities. But a Trumpist trade war would only exacerbate the damage, for a couple of reasons…. Globalization has already happened…. U.S. industries are now embedded in a web of international transactions…. A trade war would disrupt communities the same way that rising trade did in the past…. A motorist who runs over a pedestrian, then tries to fix the damage by backing up—running over the victim a second time….

The tariffs now being proposed would boost capital-intensive industries that employ relatively few workers per dollar of sales… [and] further tilt the distribution of income against labor.

So will Trump actually go through with this? He might. After all, he posed as a populist… The base might indeed like to see something that sounds more like the guy they thought they were voting for. But Trump’s promises on trade… were just as fraudulent as his promises on health care. In this area, as in, well, everything, he has no idea what he’s talking about. And his ignorance-based policy won’t end well.