Paul Krugman: Oh, What a Stupid Trade War: "Even if tariffs were expansionary, that would just make the Fed raise rates faster, which would in turn crowd out jobs in other industries...
...My professional training wants me to dismiss the jobs question as off-base. But... we... want to know whether the Trump trade war... would add or subtract jobs holding monetary policy constant, even though we know monetary policy won’t be constant.... This trade war will actually be a job-killer.... Trump is putting tariffs on intermediate goods.... Whatever gains there are in primary metals employment will be offset by job losses in downstream industries.... Other countries will retaliate.... Trump... imagines that because we run trade deficits, importing more from other countries than they sell to us, we have little to lose, and the rest of the world will soon submit to his will. But he’s wrong.... While we export less than we import, we still export a lot; tit-for-tat trade retaliation will hurt.... Trade is complicated... complex value chains, which the Trump trade war will disrupt.... A trade war will raise consumer prices.... Finally... we’re dealing with real countries... they have pride; and their electorates really, really don’t like Trump. This means that even if their leaders might want to make concessions, their voters probably won’t allow it.... This is a remarkably stupid economic conflict to get into. And the situation in this trade war is likely to develop not necessarily to Trump’s advantage..."
#shouldread
#globalization
