Tag: trade war
Drill Baby Drill? How 'MAGA Brain' May Kill US Energy Independence

Drill Baby Drill? How 'MAGA Brain' May Kill US Energy Independence

Does anyone remember “Drill, baby, drill?” What with all the tumult over Donald Trump’s disastrous trade war, many have forgotten that energy production played a big role in his second inaugural address. He claimed that we were facing a “national energy emergency,” and that he would bring prices down and make America rich by releasing the “liquid gold under our feet.”

There was, in fact, no energy emergency. One thing you always find Trump and MAGA in general doing is assuming that the real world must look the way their prejudices say it should look. Squishy liberals who believe in rule of law were in charge last year, so America must have been in the grip of a terrifying crime wave — even though the homicide rate in 2024 was close to a 65-year low:


Source: Jeff Asher

Similarly, the Biden administration was full of woke environmentalists who believe in the global warming hoax, so they must have crippled energy production — even though America in the Biden years was, for the first time in generations, producing more energy than it consumed:

When I wrote about this at the time, I suggested that Trump was suffering from "MAGA brain,"

the belief that the only way you can get results is by being tough and nasty, avoiding anything that might be considered woke. Thus, to achieve energy independence, we must put aside worries about pollution and climate change while blocking clean energy.

So administrations that care about climate change and the environment in general must be crippling the energy sector. Biden may have presided over record oil production and growing energy exports, but we’ll just say that we have an energy emergency anyway.

You can probably guess what’s coming next. There appears to be a real chance that America will lose its newly reacquired energy independence. And if it does, we know who will be responsible: Trump himself.

To see why, we need to look at the factors responsible for America’s return to energy self-sufficiency.

One of these is fracking — extracting oil and gas embedded in shale by fracturing that shale with high-pressure liquids. Yes, there are serious environmental issues involved both in the fracking process and in the fact that more fossil fuel production adds to greenhouse gas emissions. But while the Biden administration took climate change seriously, that didn’t stop oil and gas production from rising on its watch.

The other factor was the incredible rise of renewable energy. Not that long ago wind and solar power were widely seen as silly, hippy-dippy conceits. Now they’re major contributors to energy supply:


Data source: US Energy Information Administration

In the case of shale, it’s all about prices. Drilling new shale wells is expensive. In fact, Trump’s vision of drastically lower oil prices never made any sense, because any large drop in oil prices would make new shale wells unprofitable. And since production from any given shale well drops quickly over time, anything that caused new drilling to fall substantially would quickly translate into declining oil production.

How low would prices have to go to shrink the U.S. oil industry? Recently the Dallas Fed did a survey which suggested that drilling in many major fields would stop if the price per barrel fell below the low 60s:

And that was before Trump’s tariffs raised costs, so the critical price is probably higher now. And guess what: oil prices right now are at a level where we can expect production to fall. Here are oil futures:

Why did oil get cheap? Look at the sudden drop on April 2, a.k.a. Liberation Day, when Trump first announced extreme tariffs. It’s obvious that oil prices are down thanks to pessimism about the global economy, which in turn is tied to Trump’s trade war. And by the way, that war is by no means over. A new analysis by the Yale Budget Lab finds that the damaging effects of Trump’s tariffs are only modestly mitigated by his surrender to China.

And as for renewables: Trump hates them, wind power in particular. He offers crazy justifications for that hatred — did you hear about his claim that offshore wind farms kill whales? — but it’s pretty clear that he has been nursing an irrational grudge ever since he was unable to stop a Scottish wind farm that he thought ruined the view from a golf course he owns.

Oh, and I’m pretty sure that MAGA types in general dislike renewable energy because they don’t consider it manly.

So what will be the economy-boosting effects of drill, baby, drill? Nil, baby, nil.

Paul Krugman is a Nobel Prize-winning economist and former professor at MIT and Princeton who now teaches at the City University of New York's Graduate Center. From 2000 to 2024, he wrote a column for The New York Times. Please consider subscribing to his Substack, where he now posts almost every day.

Reprinted with permission from Paul Krugman Substack.

Donald Trump, Xi Jin Ping

Why Trump Will Lose His Trade War With China

Scenes from the trade war:

  • In response to Donald Trump’s huge tariffs on Chinese exports, China’s government has suspended exports of rare earth minerals and magnets, both critical to many modern industries and the military
  • Trade talks between the United States and the European Union appear to have gone nowhere, with Maros Sefcovic, the EU’s top trade official, reportedly having “struggled to determine America’s aims.”

In other words, the Chinese, unlike the Trump administration, understand what trade and trade wars are about. And the Trumpers, in addition to not knowing what they’re doing, don’t even know what they want.

Here’s what Trump and his sycophants don’t understand about international trade: It’s not about what you can sell, it’s about what you can buy.

Think for a minute about the finances of individuals. Why do people work? Not to be able to boast that they ran trade surpluses with their employers — “Hey, they paid me a lot, and I hardly bought anything from them.” No, people sell their labor so that they can afford to buy stuff.

The same is true for countries. Importing what you want — being able to get stuff from other countries — is the purpose of international trade. Exporting — sending stuff to other countries — is something we do so we can pay for imports.

OK, in practice there’s a bit more to the story, as I’ll explain below, but the complications don’t change the fundamental proposition that the benefits from international trade basically come from being able to import goods that would be expensive or impossible to produce at home. Think hydroelectric power from Canada.

This fundamental reality explains why serious analyses of Trump’s trade war with China often conclude that China, not America, has the upper hand.

On Tuesday the Financial Times had a mostly good writeup of the stakes, which pointed out that US exports to China are “heavily focused on agriculture.” The FT said that these goods are “low value-added,” which I’m not sure is true — U.S. farming is highly productive and highly capital-intensive. But what matters in a trade war is the fact that China can fairly easily find other agricultural suppliers, buying soybeans from Brazil instead of Iowa.

By contrast, the United States will have a hard time replacing many of the goods it imports from China. Furthermore, many of the goods we buy from China are industrial inputs rather than consumer goods.

So Trump has started a trade war that will disrupt our own supply chains. Remember Covid and its immediate aftermath? Remember how shortages spread through the economy and fueled inflation? Those days are about to come back, inflicting especially large damage on the manufacturing sector Trump claims he will revive.

Is the U.S. economy at China’s mercy? No. America remains a highly productive nation that could cope with even severe economic shocks if it had smart, clear-headed leadership. But we don’t.

True, Wednesday’s Wall Street Journal had an article with the headline “U.S. Plans to Use Trade Negotiations to Isolate China.” So you might think that there’s an actual strategy out there. But I don’t believe it, for four reasons.

First, this story was clearly leaked by Scott Bessent, the treasury secretary, or people close to him. In a normal administration this kind of supposedly inside scoop would offer valuable insights into the policy process. But one thing that’s clear about Trump tariffs is that there is no policy process. Individual officials — Bessent, Peter Navarro, Howard Lutnick — keep floating policy ideas in public, hoping that putting them out there will somehow create facts. But a day or two later another official will go on TV, or Trump will post something on Truth Social, completely contradicting what the last official said.

So what we’re hearing about Bessent isn’t really a scoop about Trump policy, it’s almost surely an attempt by Bessent to influence policy. And there’s no reason to believe that he’s actually in charge.

Second, even if U.S. negotiators are trying to cut deals with other countries that would isolate China, they will be unlikely to succeed because Trump has lost all credibility. After all, you can’t make deals with other countries unless foreign governments believe that you will honor the agreements you make. Trump has already destroyed U.S. credibility on that front, ripping up all our existing trade agreements, then making wild changes in his own tariffs every few days.

Third, even if Trump’s promises were credible, why would a European government want to join America’s trade war with China, destroying its own supply chains? If the argument is that it’s worth paying the cost of ruined supply chains because that will protect you from Trump’s tariffs, who trusts Trump not to reimpose punitive tariffs on our supposed allies the next time he thinks they’re looking at him funny?

Fourth, the Trump administration is bringing a knife to a gun fight.

To the extent that there’s a real plan to confront China, it appears to center on reducing China’s ability to sell abroad. It’s true that this will be painful for China’s export sector. As I said, my flat statement that trade is about imports, not exports, needs some qualification because the short-term interests of exporters can’t be ignored. But China can cope with lost exports by aiding affected industries, the same way Trump funneled money to farmers hurt by his first trade war. It can also offset any loss of export jobs by stimulating domestic demand. Moreover, Xi and the Chinese Communist Party don’t face elections.

So while China can manage the loss of exports in various ways, it will be much harder for America to cope with the loss of crucial inputs produced in China.

The overall point is that even relatively sophisticated Trumpers like Bessent are still thinking in terms of Chinese access to the markets of the United States and our imagined trade war allies, when the real issue now is whether China can strangle the U.S. economy by disrupting our supply chains.

PS: I know that I’m mixing metaphors here — China has brought a gun that is strangling us by cutting our supply chains. But you get my point.

Furthermore, America’s ability to fight a trade war is severely damaged by our descent into authoritarian rule. A few months ago other advanced countries might have been inclined to take our side because of shared democratic values. Now we’ve become a country whose government claims the right to kidnap people whenever it likes and ship them to foreign gulags. Who wants to be allied with such a government? Who will trust such a government to keep its word on anything?

Of course, the fact that the collapse of democracy will contribute to our defeat in the trade war isn’t the main reason to be horrified at where we are. Losing real GDP is bad, but it’s much less important than losing our soul. As it happens, however, we seem to be on track to do both.


Paul Krugman is a Nobel Prize-winning economist and former professor at MIT and Princeton who now teaches at the City University of New York's Graduate Center. From 2000 to 2024, he wrote a column for The New York Times. Please consider subscribing to his Substack, where he now posts almost every day.

Reprinted with permission from Paul Krugman.


Trump Blasted From All Sides For Urging 'Suicide' Trade War Against China

Trump Blasted From All Sides For Urging 'Suicide' Trade War Against China

In a just-posted campaign video, Donald Trump promises to impose massive tariffs on goods from China, which would tremendously increase the cost of living for American consumers.

The video is part of what their campaign is calling “Trump 47,” designed to paint the ex-president as having policies. He was quickly mocked.

It begins with Trump attacking President Joe Biden, claiming he is pushing a “globalist agenda.”

“I will implement a bold series of reforms to completely eliminate dependence on China,” Trump says, phasing out imports from China including electronics, steel and pharmaceuticals.

Trump also promises to “ease in a system of universal baseline tariffs on most foreign products. On top of this, higher tariffs will increase incrementally depending on how much individual foreign countries devalue their currency.”

Demonstrating hat he still does not underhand how tariffs work, Trump claims his plan will bring “trillions and trillions of dollars pouring into the United States treasury from foreign countries.”

Attorney Ron Filipkowski, a former Republican, says: “Trump announces if elected that he will start a global trade war by implementing a mercantilist system. He will raise tariffs on ‘most foreign products,’ phase out all imports from China in 4 years, and punish US companies who do business and invest in China.”

In the full video posted to his Truth Social platform Trump falsely claims that when he was President “China paid to the United States hundreds of billions of dollars and no other president got ten cents, legitimately, ten cents.”

Trump was quickly mocked.

“Poor Trump doesn’t realize the GOP base has long since moved past trade and now sees Disney cartoons and unintelligible acronyms like CRT and ESG as their real enemies,” saidThe Washington Post’s Greg Sargent.

“Bring back Herbert Hoover and the Great Depression!” tweeted economist Paul Hughes-Cromwick.

Politico food and agriculture reporter Meredith Lee Hill notes, “this Trump proposal would also trigger new and painful retaliation against US agricultural exports to China (our biggest market), just as American farmers are trying to recover from Trump’s last trade war w/ Beijing.”

Hill also writes that “one farm state GOP lawmaker [said] to me on Trump’s new China trade proposals + the impact on US agricultural exports that rely on China: ‘it’s f—ing suicide’.” She adds that another said: “‘Rushing forward w/ political slogans’ cld seriously harm US biz + ag. We need to ‘strategically decouple’ not this.”

Journalist Robert Lusetich reminds that when Trump was in office “he had a bank account in China.”

Watch a short clip below or at this link.

Reprinted with permission from Alternet.

farm, farming

Trump Comes Up $10 Billion Short On Farm Trade Relief

Donald Trump promised back in January that American farmers would benefit greatly from his highly touted trade deal with China. Now, reports show that promise may be difficult to keep.

As of May, China had purchased just $5.4 billion worth of U.S. agricultural product, despite a goal of at least $33 billion by the end of the year, the Wall Street Journal reported on Saturday.

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