Greg Sargent: This is The Daily Blast from The New Republic, produced and presented by the DSR Network. I’m your host, Greg Sargent.
The war on Canada, meanwhile, will hurt a lot of people in Trump country in other ways. But taken together, these two moves underscore a whole new level of contempt for his own voters. They expose the deep folly of MAGA economics in all kinds of clarifying new ways. So we’re talking about all of it with the best out there at explaining these things, economist Paul Krugman. Paul, good to have you back on.
Sargent: So let’s start with this beef announcement. Trump declared that the U.S. will now allow 300,000 additional metric tons of ground beef product to be imported without an additional tariff. Trump claimed he has a commitment that this beef will be sold at 25 percent below market prices. Paul, can you explain what Trump thinks he’s saying here?
Our beef import policy was pretty weird to start with. It’s a tariff quota, where you bring in a certain amount free of tariff, but then after that it pays a tariff. And this is supposed to be an addition to the quota part. But normally we think of a tariff quota as being, well, the price of beef is set by the marginal ton of beef, which pays a tariff.
So the whole thing is incoherent. I can’t imagine that anybody sat down to try and figure out how this will work. It just has this feeling of, I wanted to say something. And again, contempt. And consumers will not notice it in the supermarkets, but ranchers definitely will.
I mean, even if some beef importer said, I’m importing this at a discount because this country is selling it to us for cheaper, would he even be able to guarantee it then?
Trump complains about communists, but this is not a communist economy in which the government gets to set the price at which hamburger is sold in the supermarket. So it’s all kind of bizarre. And it’s clearly meant to say, I am doing something, without anybody, as far as we can tell, being clear about exactly what it’s being done or why it should work.
Krugman: Oh heah. I mean, every bit of the policy from the beginning has been contempt—belief that people will not understand what I’m doing, which is helped by the fact that he himself doesn’t understand what he’s doing. How can you say, foreigners pay the tariffs, and, by the way, I will help you by making them not pay the tariffs?
Sargent: Yes, and we should be clear that the contempt is directed at his own voters, don’t you think? Because, number one, as you and I have discussed on here before, and you’ve written a number of times on your great Substack, the people who are getting clobbered by Trump’s tariffs—a lot of them are MAGA voters. A lot of them are Trump voters. And so he’s clearly trying to talk to them.
Krugman: Yeah. I mean, he’s trying to claim that he’s doing something for consumers. And there’s a lot of hamburger-eating MAGA voters, who he hopes won’t remember that he’s talking out of two sides of his mouth on what tariffs do to prices. And then there’s also—he’s, I guess, taking for granted—I mean, this is not good for the farm sector, which is very, very Trumpy, or was—and he’s basically saying, you’ll vote for my people regardless. And, you know, he might be right, but at this point I’m starting to wonder about that.
Now, my understanding of this is that the auto industry has such tightly integrated supply chains across the border that people call it the “Great Lakes supercluster,” right? Which is a great phrase. Can you explain how bad this part of it is?
The point being that we are generations past the point when there was a U.S. auto industry as distinct from a Canadian auto industry. It’s been a completely integrated thing, where the components of a car can cross that border six or seven times before it ends up as a finished car, assembled sometimes on our side of the border, sometimes on theirs, but it really doesn’t matter.
So now you suddenly slap 50 percent tariffs on this, which is, among other things, a blatant violation of a solemnly signed U.S. agreement signed by none other than Donald Trump. And you’re left with the different pieces of an automobile—the plants that make those different pieces are on opposite sides of that sudden tariff wall. So it’s enormously destructive.
Krugman: Well, it’s a free trade agreement. I mean, it was originally the North American Free Trade Agreement, which he awkwardly renamed the U.S.-Mexico-Canada Agreement. But it’s a free trade agreement, which means that Canadian products—there are some exceptions—but for the most part, goods produced in either country are supposed to cross the border tariff-free.
Now Trump is saying, yeah, but we’re actually imposing 50 percent tariffs on a bunch of these products. It’s not strictly a treaty, but that’s a very legalistic distinction. It is a binding agreement. A large part of the point of these agreements, by the way, is to create certainty, so businesses can plan...I can do engine blocks in Ontario and wiring frames in Michigan, and I don’t need to worry about paying a tariff when I truck them across the border. Now all of a sudden—with the engine block factory and the wiring frame factory on different sides of the border—you’ve screwed up the entire production process for both countries.
Now, you had this great piece for your Substack in which you directly questioned that. You pointed out that we are actually far more interdependent with Canada, and far more dependent on Canada, than people realize. Can you talk about that? Because I think it’s something that a lot of people don’t know.
Give us 10 years—I don’t know how long it takes to grow the right kind of trees, but, you know, I’m not lumberjack. But it takes a long time to switch over. And meanwhile, we actually need that Canadian lumber.
And so on down the line. And electricity. I happen to be in the northeastern United States at the moment, and hydropower from Quebec is an important part of what keeps the lights on here. So this idea that we don’t need Canada is just all wrong. And if you cut it off abruptly, as is now happening, it’s a mess.
Krugman: Well, I think it’s going to spiral out of control. I mean, I don’t know how deep in we get, but—first of all, again, we have a midterm election in nine weeks. There’s going to be a lot of disruption starting like tomorrow because of this trade war. There will not be time, even if Trump suddenly says, well, all is forgiven—the effects will be there. And certainly the psychological effects will be there. And I don’t think it ends quickly, because, look, fundamentally, Trump is going to lose this trade war.
Even really pretty bad Canadian politicians are falling over each other to denounce Trump and say, we will stand firm. So this is going to be a war—Canada is not going to cave in. And by the way, Mark Carney, prime minister of Canada, has a 60 percent approval rating, you know, and 30 percent disapproval. It’s Trump upside down.
Sargent: Yes. Well, in fact, I think Mark Carney said in his speech today that this is encouraging him to try to pursue more talks with Europe. And I think this is another symptom or sign of something you’ve gotten at before, which is that Trump’s craziness is causing the rest of the world to move on without us, and imagine a post-American world in which they start to work together, maybe more than they would have before.
Sargent: Well, I want to try to juxtapose these two things. So on this one front, you’ve got Trump essentially admitting that his tariffs raise prices on consumers. He’s doing that by suspending tariffs on beef in order to bring down prices. So he admits there: my tariffs raise your prices.
Krugman: Yeah. I think we have to stop at this point imagining that there’s any rational calculation behind any of these policies. What we’re seeing now is a flailing guy who is losing it personally as well as politically—at some level knows that he’s losing it. He’s lashing out.
Sargent: Well, just to wrap this up, it seems like all these things kind of get at something about MAGA economics, if that’s an actual thing. We keep hearing these accidental admissions from Donald Trump about his own policy. So a couple times now in the last year and a half, he’s admitted that he probably should suspend deportations of immigrants who work in the agricultural industry.
I think maybe on some level there’s a tic in the punditry, a habit in the punditry, which was tempted to sort of see Donald Trump’s victory in 2024 as a sign that there’s, like, a deep and authentic conservative, right-wing-populist, nationalist streak in the American people. But now you’re getting every one of the pillars of that—meaning the pillars of this kind of right-wing economics, MAGA economics, nationalist economics—all get thoroughly discredited.
Krugman: I’m torn on this. I mean, on the one hand, I think the case that MAGAnomics, to the extent it is coherent at all, doesn’t work—I think that is really sinking in. At this point, Trump’s economic approval numbers are getting down to where...we used to think there was a hardcore of, like, 33 percent who would support anything. I think we’re about to breach that. It looks like we’re going down to—the number of people who actually approve of his economics may well drop into the 20s. And so that really isn’t there.
I know that we’ll never see it admitted, but not a day comes by that I don’t wish for the days when, you know...Biden made mistakes and things went wrong, but he did not have completely irrational idiots making policy. There were actually good, dedicated people who knew something. And I think I’m not alone. I think a lot of people are starting to feel that way.
I mean, this is the story of our lifetimes, more or less, is it not, Paul? And is there a way for Democrats to recapture that story and tell it in a way that persuades people that when Democrats run things, they work better, even if they’re not perfect? Is there a way to break from this pattern where the electorate just lurches us back and forth every two years, basically?
And maybe—in the end, most of us are not that different from Canadians. I’d like to think that the same kind of thing can work here. So let’s hope so. I mean, God knows—the next time somebody thinks that Republicans are better at running the economy, you just need to say two words, “Donald Trump,” and that’ll probably solve the problem.
Krugman: Thanks for having me on.
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