The following is a lightly edited transcript of the August 25 episode of the Daily Blast podcast. Listen to it here.
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 other day, Donald Trump announced that he will reduce tariffs for a huge amount of imported beef as a way to bring down soaring beef prices. At the same time, he’s escalating his trade war with Canada, wildly threatening a whole range of new tariffs for all kinds of products. The new beef policy is already stirring opposition from his own constituencies, like farmers and ranchers.
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.
Paul Krugman: Good to be 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?
Krugman: The short answer is no. I have no idea what he thinks he’s saying. This is really weird. I mean, the first question is, where’s the beef? Or actually, where’s the beef coming from? This is an amazing thing. He says we’re going to bring in 300,000 metric tons of beef, but won’t say from where. Among other things, with all of these food safety scares, I think people would like to know who’s supplying this beef. And anyway, so that’s kind of weird in itself.
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 somebody’s getting the right to import a bunch of beef, but it’s not at all clear why this should be passed on to consumers. And now he’s saying, well, he’s got a commitment that it will be sold at 25 percent less. And a commitment from whom? I mean, even if the wholesalers sell it cheaper, how does the supermarket know this is that imported beef that we’re supposed to sell?
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.
Sargent: Right. As far as I can tell, we don’t even know at this point which countries this beef will come from, and there’s no clear way that Trump can even guarantee that it will be sold at a discount, can he?
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?
Krugman: I mean, maybe the beef importer will promise Trump, or promise the officials, that he’ll sell it below the price of other beef. And maybe that would even happen. But then, you and I don’t buy our hamburgers from beef importers. We buy them from supermarkets. And how does any of that happen?
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.
Sargent: Well, what strikes me about all this as well is that it’s yet another admission that Trump’s tariffs actually do raise the prices for American consumers. Trump has insisted 50,000 different ways that other countries pay his tariffs, yet here he comes right out and says that reducing the tariffs will mean lower prices for consumers. I mean, doesn’t that sort of show an extraordinary level of contempt for his own voters?
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?
This does not sound to me like any kind of thought-out policy. This is thrashing. And I would ask, by the way—even if I don’t see how this actually helps consumers—but, you know, what is it, nine weeks till the midterms? The idea that this is going to change people’s views about Trump economic policy, aside from the fact that you’re going to have a few thousand really pissed-off beef producers—how does this even work politically?
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.
I mean, he’s elsewhere being quoted saying that he’s essentially begging his voters to turn up in the midterms, because they won’t turn out without him on the ballot. So he’s essentially trying to fool very, very directly his own people here, isn’t he?
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.
Sargent: Well, speaking of which, we’re in a similar situation with Canada. Trump’s trade talks with Canada collapsed over the weekend. That’s triggered 50 percent American tariffs on a range of Canadian goods. Canada’s now set to retaliate, which seems to be aimed at a number of things that will hurt Trump country. This has enraged Trump, who’s now vowing to impose 50 percent tariffs on cars, trucks, and auto parts starting in January.
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?
Krugman: Yeah. I mean, there is no U.S. auto industry. Not now. We had a free trade agreement on autos with Canada in 1966. We’ve had free trade in autos and auto parts for that long, for 60 years. We had a free trade agreement across the board with Canada in 1988. We had NAFTA in 1994, and then, you know, Trump basically had his name inscribed on it and called it the USMCA in his first term.
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.
We’re so tightly integrated that most of the statistics on metropolitan areas have a metropolitan area called Detroit–Windsor, where Windsor is the Canadian half of it, because it’s effectively just one city. We are that tightly integrated.
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.
Sargent: You mean the trade agreement that Trump signed during his first term. Can you talk about how what he’s doing would directly violate that particular deal?
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.
The Europeans have a customs union, which means that there basically is no border. Here there is a border. You have to basically wave a sheet of paper at the inspector that says these are American products, so they get to cross free. But there is no tariff. That’s what a free trade agreement is: goods enter free of tariffs.
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.
Sargent: Well, I want to ask about something Trump said. When he threatened tariffs on all these Canadian goods next year, meaning all these auto parts and cars and trucks, he raged, quote, in all caps, of course: “We don’t need Canada. They need us.”
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.
Krugman: Yeah, it’s one of those things—I have learned a lot in these Trump years, because we’ve had so many disruptions, that when you get granular on international trade, it turns out that there’s a lot more sort of crucial interdependence than you might realize. So America produces a lot of lumber. And we import something like a fifth of our lumber from Canada. You say, well, OK, but we’re 80 percent self-sufficient. But it turns out that lumber isn’t lumber—that is, there are different kinds of trees, and they have different properties. And it turns out that the Canadian trees are higher strength-to-weight ratio than the U.S. trees, which means that they’re what you want to use when you’re framing a house. So suddenly—and like 90 percent of that kind of lumber comes from Canada—so suddenly, yes, we do need Canadian lumber.
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.
Oil: The U.S. is a net exporter of oil thanks to fracking. So you can say, well, we don’t need Canadian oil—except that the Canadian oil goes to the upper Midwest, which cannot easily get the oil from someplace else. The Canadian oil is different. It’s, again, the details—it’s heavier crude, which turns out to be important for some purposes. So actually, yeah, we have lots of oil in America, but not the right kind of oil, and not in the right places.
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.
Sargent: What’s going to happen if this trade war continues to spiral out of control? Is it going to?
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.
And it is not because we’ll be hurt worse than the Canadians. We are bigger, they will be hurt worse than we are. But the Canadians know why they’re fighting. The Canadians know that Donald Trump is the villain. And you have to search really hard to find an American who hates Canada. You know, even a majority of Republicans think that Canada is good. It’s come down a bit under Trump, but still. And so the Canadians are going to dig in.
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.
But Trump cannot admit that he’s lost. It’s this kind of trade version of Iran. He lost the Iran war months ago, but cannot bring himself to admit it. And the trade war with Canada surely will follow the same pattern. So, gosh, this is not going to be over. This is going to—you know, at some level it may end with Canada joining the European Union. I don’t know.
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.
Krugman: Yeah, it’s worth saying, by the way, that this is not just psychology and future attitudes, but concrete steps are happening because of this. The Canadians are building pipelines that will take oil from Alberta to the Pacific so they can sell it to Asia instead of selling it to us. Assuming that sanity returns to the United States, we will enter a world in which physical facts have been created that make us less influential, less able to conduct productive business with our northern neighbor.
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.
And then on this other front, he says, I’m going to impose a whole bunch of new tariffs on Canada, the country that you all love. I just—you put it all together, and it starts to seem so crazy that it’s almost unprocessable.
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.
I’m kind of worried about—at a certain point, as it’s all going to hell, and assuming that the midterms go really badly for Republicans, Trump won’t say, I need to reconsider, what have I been doing wrong. He’s going to blame America: We have failed him, not the other way around. My imagination isn’t good enough to think of all the destructive things he might do, but there really is a kind of a downfall feeling to all of this.
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 at one point he actually said something like, you know, people in the farm industry are losing good, hardworking people. And by that he meant the same people he calls rapists and murderers, meaning immigrants. So there he admits that his mass deportations are bad for the economy, right? So you’ve got that. Now you’ve got this new admission that tariffs actually raise the prices for consumers.
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.
Do you think that’s happening, and is there, like, an opening to come back into this debate for Democrats and liberals to say, OK, you now know populist nationalism failed, now let’s go back to the way liberals do things? What do you think of all that?
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.
But then, of course, this was never mainly about economics. It was always much more about race, about misogyny, about whatever—these cultural, emotional issues. And that probably won’t go away. I mean, but hopefully we can function as a country with 70 percent of the population believing in rational economic policy.
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.
Sargent: I do wonder whether there’s finally an opportunity to do what Democrats have failed to do for so long, which is say in a straightforward way: when Republicans run things, it all goes to shit; when Democrats run things, they get better. Now, Trump’s way of running everything into the shitter is different than George W. Bush’s, but the pattern does apply, right?
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?
Krugman: Of course the answer is, I don’t know. The politics is kind of mysterious. But I would say, look at Canada, where you have a technocratic prime minister who—he’s one of the few world leaders I actually know, because I met him at many central bankers’ meetings over the years: Former governor of the Bank of England, and competent, and immensely popular. It happens that he’s pretty good at wearing a hockey shirt, but still, it does show that you can do that.
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.
Sargent: Boy, do I hope that’s true. And it’s really tempting to believe it. And it does seem like Donald Trump has made that more possible than it has been in the past. Folks, make sure to check out Paul Krugman’s Substack. It’s a wonderful piece of work. Every day, in and day out, you’ll learn from it. Paul, thank you so much for coming on, as always. We really appreciate it.
Krugman: Thanks for having me on.
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