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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.

Tariffs, Jobs And Why You Should Care About Poverty In Bangladesh

Tariffs, Jobs And Why You Should Care About Poverty In Bangladesh

I’ve returned from Europe to the United States. Miraculously, my flight to Newark landed on time. So this seems like a good day to write about … Bangladesh. I’ll explain shortly.

First, a note on the current state of the trade war. Many people, including many small investors, still believe and/or hope either that Donald Trump will soon negotiate many trade deals or that he will claim he has, declare victory, and back off his massive tariff hike. They’re deluding themselves.

Consider what we’ve learned about Trump as the negative fallout from his tariffs has started to become obvious.

First, he’s invincibly ignorant. The collapse of imports from China has businesses terrified and warning both of soaring consumer prices and of looming shortages. But Trump says it’s all good:

We were losing hundreds of billions of dollars with China. Now we’re essentially not doing business with China. Therefore, we’re saving hundreds of billions of dollars. Very simple.

Hey, remember those empty shelves during Covid? Americans were doing great! Think of all the money they saved by not buying toilet paper, because there was none to be had. Very simple.

Second, when he’s in a hole, he just keeps digging. His talk about making Canada the 51st state had a decisive effect in Canada’s recent election, hugely bolstering anti-Trump forces. But yesterday, meeting with Prime Minster Mark Carney, who kept his office thanks to this backlash, Trump kept pushing the idea.

Carney remained polite — he is, after all, Canadian — but his facial expressions during the meeting were something to behold.

The best bet, then, is that the trade war will proceed, even intensify. There will be some winners, at least in terms of global influence, including China, which gains from America’s loss of credibility, and the European Union, which unlike Trump’s America can be trusted to honor its agreements. The United States will be a big loser, both politically and economically.

But the biggest losers will be poor countries that have become less poor largely thanks to exports and are about to see their hopes of progress dashed.

Possibly the most hated article I’ve ever written was a 1997 piece for Slate titled “In Praise of Cheap Labor,” which was mainly aimed at left-wing critics of globalization. I argued that much as the sight of low-paid workers producing cheap goods for rich countries may — and should — disturb us, labor-intensive exports are often poor countries’ best hope of progress.

This argument has only become stronger over time. The New York Times recently had a very good article on Bangladesh, which 50 years ago was the poster child for warnings about mass famine driven by overpopulation. Instead, the South Asian nation became, not a banana republic, but a pajama republic, one of the world’s leading clothing exporters. It’s still a poor country, with wages and working conditions that are appalling by advanced-country standards. But as the chart at the top of this post shows, Bangladesh is about four times as rich as it was in the 1980s, when its exports began rising.

But now the country faces the possibility of economic catastrophe, made in America. Trump’s “Liberation Day” trade plan would have imposed a 37 percent tariff on imports from Bangladesh. That plan is temporarily on hold, but it seems all too possible that it or something as bad or worse will come back.

OK, I know that most Americans don’t care about Bangladeshi living standards. They should, even on selfish grounds: condemning 170 million people to deeper poverty would be a threat to global stability. But here’s the thing: Throwing up barriers to Bangladeshi exports doesn’t involve a tradeoff, helping American workers at others’ expense. It’s pure loss, hurting both nations.

Why? Because making imported clothing more expensive here won’t create U.S. jobs. Apparel production, still largely carried out by people hunched over sewing machines, is just too labor-intensive to be economically feasible in the United States, no matter how high the tariffs.

Trump’s people don’t seem to get that. True, Howard Lutnick, the Commerce Secretary, famously claimed that tariffs could indeed create jobs in labor-intensive activities, although he didn’t use clothing as an example:

The armies of millions of people- well, remember, the army of millions and millions of human beings screwing in little- little screws to make iPhones, that kind of thing is going to come to America.

Um, no it isn’t, and shouldn’t.

Taxes on imported clothing will, however, raise Americans’ cost of living. The poor and the working class, who are more likely to buy inexpensive imported clothing, will be hurt worst. But hey, Trump says that children don’t need multiple dolls; why do their parents need multiple pairs of underwear?

Not incidentally, Greg Sargent looked into what it would actually take to manufacture dolls in the United States. Even if it could be done, it would produce only a handful of jobs — and the jobs would be terrible and pay badly.

The point is that Trump and his team have done something remarkable: They have started a trade war that is bad both for Americans and for countries that sell to us. But Trump is unlikely to change course. The economic punishment will continue until morale improves.

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.

Economy

Ignore Trump's Distractions -- This Is His Economy Now

Many people have complained about New York Times headlines, with reason. All too often an equivocating, sanewashing headline belies the excellent reporting that follows. But yesterday the Times got it right about the first-quarter decline in GDP: “Trump boasts about the economy, but says weak data is Biden’s problem.”

There will be much more of this as the data get worse, which they will. (I’m going to keep treating “data” as plural unless it refers to a Starfleet commander.) In fact, I worry a lot about Trump putting pressure on the statistical agencies to report better numbers. He has already said that reports of rising prices are “fake news”.

For now, however, it’s important to be clear that the bad news is all on Trump’s head, and we mustn’t let him get away with claiming otherwise.

It’s true that most of the time presidents have much less impact on the economy than many people believe. It’s also true that a president’s policies usually don’t have large economic effects in the first few months of their administration.

But Trump’s policies have been so extreme that they are already making the economy visibly worse. In particular, expectations of high tariffs began distorting business decisions even before the tariffs went into effect. If you look at the GDP numbers released yesterday, you see a huge surge in imports coupled with a large surge in inventories. Both of these clearly reflected businesses “front-running” expected tariffs, racing to buy as much from China in particular as they could before the tariffs went into effect.

And the effects of Trump’s policies will become even clearer, and even worse, over the next few months. Those insanely high tariffs on China have led to a collapse in shipments from China to the United States, which will soon be reflected in soaring prices and, probably empty shelves.

We’re also already seeing signs of Trump’s policies causing broad economic weakness:

Trump himself seems to be aware that he’s causing major supply-chain disruptions.

“You know, somebody said, ‘Oh, the shelves are going to be open,’” Mr. Trump said. “Well, maybe the children will have two dolls instead of 30 dolls, you know? And maybe the two dolls will cost a couple of bucks more than they would normally.”

OK, having Trump come out as a critic of consumerism and proponent of the higher, spiritual side of life wasn’t on my bingo card.

What I and everyone else did expect was that when the economy turned bad, Trump would refuse to accept responsibility and blame his predecessor. And right on cue, that’s what is happening.

So this is a good time to remember that Trump actually inherited a very good economy, one that was outperforming all its peers. From The Economist, last October:

When Trump moved into the White House, America had historically low unemployment and inflation only slightly above the Federal Reserve’s (arbitrary) target of 2 percent. Look at the “misery index,” the sum of inflation and unemployment — a crude but usually pretty good measure of how the economy is doing. As of January that index was quite low by historical standards:

Were there deep underlying problems, reasons to believe that the appearance of prosperity was somehow misleading? No. I’ll probably write at some point about claims by Trump’s minions that the Biden economy was somehow bad despite low unemployment and inflation combined with rising real wages. But for now let me just say that none of these claims stands up to even casual scrutiny.

In short, pay no attention to Trump’s excuses. The U.S. economy was in good shape when he came in. If everything is going to hell — which it is — he has nobody but himself to blame.

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 Is 'Godfather In Reverse' -- And Now Faces Economic Catastrophe

Trump Is 'Godfather In Reverse' -- And Now Faces Economic Catastrophe

Yesterday’s election in Canada was a bit closer than polls predicted. Nonetheless, Mark Carney’s Liberal Party, which appeared doomed just two months ago, won a solid victory. And the credit goes mainly to Donald Trump.

If Trump had merely made economic demands on our northern neighbor, Canada might have acquiesced, although it’s not clear what concessions it could have made. But by repeatedly insisting that Canada must become the 51st state, he made any hint of Trumpiness toxic in Canadian politics. Hence the stunning defeat for Pierre Poilievre, the Conservative leader (who lost his own seat in Parliament.)

The Canadian election, then, demonstrates why Trumpist trade policy, and foreign policy in general, is doomed to catastrophic failure. Trump isn’t trying to drive tough substantive bargains. Mainly, he seems to want to indulge in narcissism, demanding that other nations humiliate themselves so he can put on a display of dominance. And America doesn’t have remotely enough leverage, even against Canada, to make such demands. You could say that Trump is a reverse Godfather, making offers other countries can’t accept.

Consider the state of negotiations — or, actually, non-negotiations, since talks appear to have broken down — with Japan, another country Trump appears to have thought he could bully. Japan does sell a lot to the United States and might have been willing to offer something to preserve its access to our market.

But reports indicate that Japanese representatives sent to Washington left without accomplishing anything because they found Trump’s people impossible to deal with. The Americans insisted that the Japanese make offers without giving any indication of what our side wanted — in effect, they demanded that Japan make a show of obeisance without any reason to believe that it would get anything in return. The Japanese government wouldn’t, probably couldn’t do that. After all, it has to answer to its own voters. So there is no deal.

And then there are the Chinese, who — unlike the Canadians or even the Japanese — probably have more economic leverage over us than we have over them. They have no interest in helping Trump sustain his fantasies of dominance. Bear in mind that Trump’s trade war is working out very well for them. Bloomberg reports that

President Xi Jinping’s diplomats are fanning out across the world with a clear message for countries cutting deals with Donald Trump: The US is a bully that can’t be trusted.

Unfortunately, they’re right. And Trump’s repeated insistence that the Chinese are negotiating with him, when they say they aren’t, comes across as pathetic.

Will Trump manage to make any trade deals? I guess it’s possible that Trump will announce trade deals with a few countries here and there. But his ability to get even fake deals is rapidly dwindling, for two reasons.

First, he’s plunging in the polls. True, he’s insisting that the polls are wrong and that pollsters should be investigated for election fraud. And the MAGA base may believe him. But this denial just makes him look even more pathetic to foreign governments, and they won’t be inclined to throw a drowning Trump a lifeline.

Second, Trump’s trade war is about to have a disastrous effect on the U.S. economy — more disastrous than even pessimistic economists, myself included, expected. Tariffs always raise prices. But the sheer size and suddenness of Trump’s tariffs, combined with the paralyzing effect of uncertainty about what comes next, are about to deliver a Covid-type supply shock to an economy already sliding into recession. This looming disaster, which will further weaken Trump, makes it even less likely that our main trading partners will help him pretend that he’s achieving anything.

Oh, and Amazon is planning to show the effects of tariffs on its prices — and the White House has gone berserk.

Back to Canada: Our northern neighbor is, along with Mexico, among the countries most at risk from Trump’s trade war. Canada does a lot of trade with the much larger U.S. economy. According to Statistics Canada, 2.6 million Canadians, 13 percent of the work force, are employed directly or indirectly producing goods exported to the United States. So U.S. tariffs will impose a huge shock on Canada’s economy.

It's not clear how much Carney can or will do to mitigate that shock. But he has no alternative to going elbows up: There’s no way to satisfy Trump’s demands. And you do have to wonder whether Trump will fold once it becomes clear how badly his trade war is going.

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.


'Sudden Stop': A Trump-Branded Crisis Hits US Economy (And Dollar)

'Sudden Stop': A Trump-Branded Crisis Hits US Economy (And Dollar)

Bloomberg posted an article titled “Markets Are Discovering the Real Trump Trade Is ‘Sell America’.” That’s about right. Look at the value of the dollar on international markets, shown at the top of this post. For a while after the election investors loved Trump, not wisely but too well. But in the face of one idiotic policy move after another, they’ve gradually fallen out of love, and now seem to be capitulating. I think they still haven’t faced up to how bad it is, but they’re figuring it out.

What we’re seeing now is something familiar to those of us who have studied economic crises in other countries, usually but not always emerging markets. For this is looking more and more like a “sudden stop.” That’s what happens when a country that has relied on large inflows of foreign capital loses the confidence of international investors. The inflow of money dries up — and the economic consequences are usually ugly.

Trump inherited an economy in remarkably good shape. We’d had “immaculate disinflation”: The inflation spike of 2021-22, largely caused by Covid-related supply chain disruptions, had faded away without a large rise in unemployment:


Source: St. Louis Federal Reserve

But Trump wasted no time in squandering the hand he’d been given. It’s not just the destructive tariffs. It’s also the chaos, as policy zigzags wildly, and the craziness. If you were a foreign investor, would you want to bet on America right now? Would you even want to visit to look at investment prospects, given the risk that you might be imprisoned by ICE because you once sent a text critical of Trump?

The economic consequences of sudden stops are, as I said, usually ugly. I’m writing this from Portugal, which — along with other southern European nations — was hit by a sudden stop in capital inflows just as it was recovering from the global financial crisis of 2008. The result was another severe economic slump that produced immense misery:


Can the United States suffer comparably? We have some big structural advantages that, say, Portugal in 2011 or Argentina in 2001 lacked. Above all, America’s foreign debt is overwhelmingly in dollars. This means that a plunging dollar won’t cause the domestic-currency value of our debt to explode, the way it typically does in emerging-market crises. And U.S. businesses and individuals have large overseas investments that will become more valuable in dollar terms as the dollar falls. As a result, the Trump slump in the dollar will, at least temporarily, lead to an improvement in our international investment position, the difference between U.S. assets and liabilities.

On the other hand, Portugal in 2011 or even Argentina in 2001 had mostly sane leadership. We don’t. As a number of people have pointed out, there may be no other government in the world that would have kept Pete Hegseth in office given his performance so far.

And as things get worse, there’s no reason at all to believe that Trump and those around him will look for policy solutions. Instead, we’ll see a combination of denial and efforts to blame someone else. Trump has already declared that reports of rising prices are “fake news.” And he’s already setting the stage for making Jerome Powell — “Mr. Too Late” and “a major loser” — his scapegoat for everything that goes wrong.

Coming next are conspiracy theories.

[Screengrab may have been fake?]

None of this was necessary. The U.S. economy was doing well before Trump came into office. Trumponomics isn’t a response to real problems. It’s a president who has waged a war on competence indulging his personal obsessions.

But America and the world will suffer the consequences.

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.

Reprinted with permission from Substack.

Why We Should All Fear A Trumpified Federal Reserve

Why We Should All Fear A Trumpified Federal Reserve

Sometimes the Federal Reserve has extraordinary power over the economy.

Consider what happened from 1982 to 1984. For most of 1982 the U.S. economy was in grim shape. Employment had plunged, especially in manufacturing. The unemployment rate hit 10.8 percent in December (it was 4.2 percent last month.) And economic pain helped Democrats make major gains in the 1982 midterms.

But everything was about to change, thanks to the Fed. In the summer of 1982 the Fed decided to ease monetary policy. Interest rates plunged, and about 6 months later the economy began a stunning rebound, growing 4.6 percent in 1983 and 7.2 percent in 1984. Ronald Reagan claimed credit for “Morning in America,” but actually it was the Fed that did it.

This episode illustrates the Fed’s power — power that must be insulated from abuse by politicians, especially politicians like Donald Trump.

Over the past several days Trump has been demanding that the Fed cut interest rates and calling for the Fed chairman’s “termination.” It’s worth looking at what he posted on Truth Social to get a sense of how, to use the technical term, batshit crazy he is on this subject:


And we really, really don’t want someone that crazy dictating monetary policy.

The reason we don’t want politicians in direct control of monetary policy is that it’s so easy to use. After all, what does it mean to “ease” monetary policy? It’s an incredibly frictionless process. Normally the Federal Open Market Committee tells the New York Fed to buy U.S. government debt from private banks, which it does with money conjured out of thin air. There’s no need to pass legislation, place bids with contractors, deal with any of the hassles usually associated with changes in government policy. Basically the Fed can create an economic boom with a phone call.

It's obvious that this kind of power could be abused by an irresponsible leader who wants to preside over an economic boom and doesn’t want to hear about the risks. This isn’t a hypothetical scenario. Consider what happened in Turkey, whose Trump-like president, Recep Tayyip Erdoğan, recently arrested the leader of the opposition. When the global post-Covid inflation shock hit, Erdogan embraced crank economic theories. He forced Turkey’s central bank, its equivalent of the Fed, to cut interest rates in the belief, contrary to standard economics, that doing so would reduce, not increase inflation. You can see the results in the chart at the top of this post.

How can we guard against that kind of policy irresponsibility? After the stagflation of the 1970s many countries delegated monetary policy to technocrats at independent central banks. Can the technocrats get it wrong? Of course they can and often have. But they’re less likely to engage in wishful thinking and motivated reasoning than typical politicians, let alone politicians like Trump.

What makes Trump’s attempt to bully the Fed especially ominous is the fact that the Fed will soon have to cope with the stagflationary crisis Trump has created. Trump’s massive tariff increase will lead to a major inflationary shock:

Moreover, Trump has also created huge uncertainty by radically changing his policies every few days, which will depress spending and may well cause a recession:

Not incidentally, Trump has been able to pursue these destructive policies because U.S. law gives the president enormous discretionary power over tariffs. And now he wants the same kind of discretionary power over the Fed.

As a consequence of Trump’s destructive tariff regime, the Fed will soon face a dilemma. Should it raise interest rates to fight inflation, or should it cut rates to fight recession? It’s a really hard call, and it’s quite possible that Jay Powell will get it wrong. Trump has made Powell’s dilemma even worse with his attempted bullying, because a rate cut would be seen by many as a sign that Powell is giving in to avoid being fired.

But one thing we know for sure is that we don’t want Trump making that call. Like Erdogan, he has embraced crank economic doctrines to justify his policies, in Trump’s case the ludicrous claim that tariffs won’t raise consumer prices. Does anyone doubt that when inflation rises, he’ll dismiss it as “fake news”?

So will Trump’s attempt to bully the Fed succeed? According to the Wall Street Journal, he has spent months talking privately about firing Powell. He doesn’t have the legal authority to do that, but Trump doesn’t worry about pesky things like legal limits to his authority. Yesterday he told reporters that he can easily get rid of Powell: “If I want him out, he’ll be out of there real fast, believe me.”

And given how quickly Trump has been able to subvert or destroy many other government institutions, it’s hard to feel confident that he can’t do the same to the Fed. Fear of market reaction — America is already facing a serious credibility problem, with the dollar falling even as interest rates rise — will probably restrain him, but he may not believe people telling him that taking over the Fed would cause the dollar to plunge while long-term interest rates soar as investors expect higher inflation.

Between Trump’s tariffs, the economic spillover from deportations and terrorization of immigrants and the attempt to politicize the Fed, the upside risk to inflation now looks very high. The bitter irony is that many Americans voted for Trump because they thought he would bring prices down.

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.

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.


Political Styles Of The Rich And Clueless

Political Styles Of The Rich And Clueless

As we wait to see what fresh hell awaits us this week, one obvious question is, who put these malevolent clowns in power?

The short answer is ignorant people. But political ignorance takes two different forms.

On one side there are “less-engaged” voters who don’t follow politics closely. And to be fair, ordinary Americans have good excuses for not paying close attention to the news: They have jobs to do, children to raise, lives to live. Unfortunately, many of these voters believed Trump’s fabulist promises. They are only now beginning to understand what they voted for.

There’s now a huge debate among Democrats about how to reach less-engaged voters. But that’s a topic for future posts.

But less-engaged voters weren’t the only people who missed the warning signs and supported Donald Trump. Trump also had a number of ultra-wealthy backers, both on Wall Street and in Silicon Valley, who are now shocked, shocked to discover that he is who he always was.

Over the weekend Bill Ackman, a hedge-fund billionaire who has been one of Trump’s most vocal supporters, suddenly turned on his champion, declaring on X that

by placing massive and disproportionate tariffs on our friends and our enemies alike and thereby launching a global economic war against the whole world at once, we are in the process of destroying confidence in our country as a trading partner, as a place to do business, and as a market to invest capital.

But Ackman refused to take any responsibility for enabling the destruction:

I don't think this was foreseeable. I assumed economic rationality would be paramount. My bad.

Indeed. Who could have foreseen that the self-proclaimed Tariff Man, who posts crazy stuff on Truth Social every day, would impose destructive tariffs? Who could have imagined that the many economists, myself included, who warned that a Trump victory would be very bad for the economy would turn out to have been right? Or if we were wrong, it was only because we underestimated the damage.

OK, Ackman is a fool, but he wasn’t alone in getting Trump all wrong. Many wealthy people imagined that Trump II would be like Trump I, mostly a standard right-winger with a bit of a protectionist hobby. They thought he would cut their taxes, eliminate financial and environmental regulations and promote crypto, making them even wealthier. They expected him to back off his tariff obsession if the stock market started to fall. If he ripped up the social safety net, well, they don’t depend on food stamps or Medicaid.

And if Trump II really had been like Trump I, America’s oligarchs would be very happy right now.

It's also true that successful businessmen often believe that their financial success makes them experts on economic policy even though they haven’t made any effort to understand the issues.

Even relatively sensible business leaders like Jamie Dimon of JPMorgan Chase tend to stumble when they try to play economist. Does anyone remember Dimon proclaiming in 2014 that we couldn’t restore full employment because American workers didn’t have the right skills? Five years later the unemployment rate was below 4 percent.

I was struck over the weekend when Elon Musk (I know, I know), seemingly breaking with Trump, called for zero tariffs between the United States and Europe. I think it’s safe to assume that Musk has no idea that trans-Atlantic tariffs were, in fact, close to zero in 2024: The average European Union tariff on U.S. goods was 1.7%, the average U.S. tariff on EU goods was 1.4%.

Finally, great wealth often enables great pettiness. Some readers may remember Wall Street’s “Obama rage”: Financial titans were furious at the president who bailed them out after the global financial crisis because he dared to hint that they had played some role in causing that crisis. Why, he even called them “fat cats!”

The pettiness has been even worse this time around. A few days before the inauguration the Financial Times ran an article titled “Is corporate America going MAGA?” that quoted one “top banker”:

I feel liberated. We can say ‘retard’ and ‘pussy’ without the fear of getting cancelled . . . it’s a new dawn.

I wonder how liberated he’s feeling now.

To be honest, I’m actually glad that Trump II is proving to be such a disaster for the economy. If he had exercised some restraint, if he had simply claimed credit for the very good economy Joe Biden left him, many wealthy people would have cheered him on while he destroyed democracy. Now they may turn on him.

But I hope the rest of us have learned a lesson from the oligarchy’s support for Trump, even if it’s now cracking: Extreme wealth inequality has given great power to people who exert a malign influence on our politics.

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's Autocracy Is A Rude Awakening For His Small Business Fans

Trump's Autocracy Is A Rude Awakening For His Small Business Fans

One odd feature of U.S. politics is that businesspeople, especially small business owners, always seems to believe that they will do better under Republicans, even though history shows that business does better under Democrats. Small business owners supported Trump in the last election, despite ample evidence that he would be very bad for business.

And now they’re getting a rude awakening.

Let’s talk for a second about price controls.

A few weeks ago Viktor Orban, Hungary’s de facto dictator and a darling of the MAGA set, announced that he was imposing profit-margin caps — basically price controls — on groceries. I intended to write something about that as a warning that something similar might happen in the United States, that businesspeople were fools if they assumed that Donald Trump was on their side.

Unfortunately, I never got around to writing that post. So I missed my chance to be prophetic, because it has already happened: Trump reportedly told auto executives sometime in March not to raise prices in response to tariffs. He denies that he said it, but the reporting looks solid. His headline-making assertion that he “couldn’t care less” about rising car prices seems to have been about imported autos, not domestic production.

The reason I expected Trump to follow in Orban’s footsteps is that Trump, like Orban, clearly doesn’t have any fixed principles other than power and self-aggrandizement. Under Trump, policy won’t reflect any consistent ideology. It will, instead, change with his perception of personal advantage, his temper tantrums, his whims and his malignant narcisissim. If he doesn’t like rising prices, he’ll try to stop inflation through bullying.

In short, MAGA will be very bad for business.

Most immediately, it seems as if Trump doesn’t care that his tariffs will raise business costs in addition to raising prices for consumers. We’ll get a better sense of how much costs will rise after “Liberation Day,” the big announcement of new tariffs planned for Wednesday. (War is peace, freedom is slavery, tariffs are tax cuts.) But the increase has already begun.

Indeed, thanks to tariffs already in effect the U.S. economy is already getting unscrewed, with manufacturers having a hard time keeping their stuff together.

You see, steep tariffs on steel and aluminum were the opening salvo in Trump’s trade war, and they are being applied not just to the metals themselves but to anything made from the metals, including screws, nuts, and bolts. And foreign producers are not absorbing the tariffs; they are sharply raising prices.

This was, of course, predictable and predicted. Tariffs don’t just make foreign goods more expensive to consumers. In a world where many of the goods we import are productive inputs like screws — or auto parts — tariffs directly raise the cost of manufacturing in the United States. Yet Trump’s threats against automakers suggests that he thinks he can control inflation through intimidation.

The direct effect of tariff-driven rising costs is, however, just the beginning of the ways Trumpism will be bad for business.

In the past I’ve been skeptical about claims that uncertainty is a big factor in the economy. During the Obama years vague appeals to “uncertainty” often seemed, in practice, to be invoked as a fancy way of saying “policies I don’t like,” and was used as an excuse for ignoring that fiscal austerity forced by congressional Republicans held the economy back. But in the 10 weeks since Trump was inaugurated, perceived uncertainty has soared. Here’s one widely cited index:

It’s not hard to see why. Trump’s apparent turn to price controls is just one more indication that there are no longer any rules, that economic policy changes from day to day with Trump’s moods. I’m finishing this post up just two days before the big tariff announcement, and all indications are that the administration still hasn’t decided on the general structure of the tariffs, let alone their size. Nor will we be able to take the issue as settled after the big announcement: Trump may impose further tariffs, or slash them as suddenly as he raised them, depending on who spoke to him last. L’Etat, c’est Trump.

This kind of uncertainty is paralyzing for businesses, who are realizing that any kind of long-term commitment can turn out to have been a disastrous mistake. Build a plant that depends on imported parts, and Trump may cut you off at the knees with new tariffs. Build a plant that’s only profitable if tariffs stay in place, and Trump may cut you off at the knees by backing down.

Again, the point is that there really isn’t a MAGA economic philosophy, just whatever suits Trump’s fragile ego.

All of this was predictable and predicted. Before the election many economists warned that Trump’s policies would be destructive, although the models didn’t really take the sheer craziness into account.

The remarkable thing is how many supposedly hard-headed businesspeople didn’t see the obvious. Small business owners, in particular, clearly favored Trump, and as the chart above shows, their optimism soared when he won. Now it’s crashing.

So business owners allowed themselves to be deluded, as usual, but with even less excuse than normal. What they should have realized is that Trump’s lack of concern for ordinary Americans’ lives doesn’t mean that he’s pro-business, and that the election wasn’t about left versus right — it was about rule of law versus autocracy. Now we’re getting a first taste of what life under autocracy is like, and it’s bad for everyone, including businesspeople.

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.

Worthwhile Canadian Observations, Or Resistance North Of The Border

Worthwhile Canadian Observations, Or Resistance North Of The Border

For those puzzled by my headline: Back in 1986 The New Republicchallenged its readers to come up with a headline more boring than “Worthwhile Canadian Initiative,” the title of a New York Times op-ed by Flora Lewis. They couldn’t. Canada, you see, was considered inherently boring.

As I wrote a couple of months ago, economists have never considered Canada boring: It has often been a laboratory for distinctive policies. But now it’s definitely not boring: Canada, which will hold a snap election next month, seems poised to deliver a huge setback to Donald Trump’s foreign ambitions, one that may inspire much of the world — including many people in the United States — to stand up to the MAGA power grab.

So this seems like a good time to look north and see what we can learn. Here are three observations inspired by Canada that seem highly relevant to the United States.

Other countries are real

I don’t know what set Trump off on Canada, what made him think that it would be a good idea to start talking about annexation. Presumably, though, he expected Canadians to act like, say, university presidents, and immediately submit to his threats.

What he actually did was to rally Canadians against MAGA. Just two months ago Canada’s governing Liberals seemed set for a historic collapse, with Conservative leader Pierre Poilievre the all-but-inevitable next prime minister. Now, if the polls are to be believed, Poilievre — who has been trying to escape his image as a Canadian Trump, but apparently not successfully — is effectively out of the running:

I won’t count my poutine until it’s served, but it does seem as if Trump’s bullying has not only failed but backfired spectacularly. (And, arguably, saved Canada; all indications are that Poilievre is a real piece of work.) But why?

Much of this is on Trump, who always expects others to grovel on command. But it also reflects a general limitation of the American imagination: we tend to have a hard time accepting that other countries are real, that they have their own histories and feel strong national pride. Canada, in particular, arguably defined itself as a nation in the 19th century by its determination not to be absorbed by the United States.

In fact, there are almost eerie parallels between some of those old confrontations and current events. The 1890 McKinley tariff, of which Trump speaks with such admiration, was in part intended to pressure Canada into joining the U.S.. Instead, it inspired a backlash: Canada imposed high reciprocal tariffs, sought to strengthen economic linkages between its own provinces, and built a closer economic relationship with Britain.Sure enough, Mark Carney, the current and probably continuing Canadian prime minister, has emphasized removing remaining obstacles to interprovincial trade and seems to be seeking closer ties to Europe.

Trump may expect submission; he’s actually getting “elbows up.”

Time and chance happeneth to us all

Why, but for the grace of Donald Trump, was the Liberal Party headed for electoral catastrophe? There were specific policy issues like the nation’s carbon tax and Justin Trudeau’s personal unpopularity, but surely the main reason was a continuation of the factors that made 2024 a graveyard for incumbents everywhere, especially continuing voter anger about the inflation surge of 2021-22.

Some of us tried to point out that the very universality of the inflation surge meant that it couldn’t be attributed to the policies of any one country’s government. If Bidenomics was responsible for U.S. inflation, why did Europe experience almost the same cumulative rise in prices that we did? But there was never much chance of that argument getting traction in the United States, where we have a hard time realizing that other countries exist.

The Canadians, however, definitely know that we exist, and you might think that public anger over inflation would have been assuaged by the recognition that Canada’s inflation very closely tracked inflation south of the border:

But no, Canadian voters were prepared to punish the incumbent party anyway for just happening to hold power in a difficult time. The race is not to the swift, nor the battle to the strong, neither yet electoral victory to parties with good policies; but time and chance happeneth to them all.

Life is about more than GDP

Canada’s inflation experience looks a lot like ours, but in other ways Canada has clearly underperformed. In particular, it has had weak productivity growth, which has left it substantially poorer than the U.S.. Canada, The Economist declared in a much-quoted article, is now poorer than Alabama, as measured by GDP per capita.

That’s not quite what my numbers say, but close. Yet Canada doesn’t look like Alabama; it doesn’t feel like Alabama; and by any measure other than GDP it isn’t anything like Alabama. Here’s GDP per capita along with a widely used measure of life satisfaction, the same one often cited when pointing out how happy the Nordic countries seem to be, and life expectancy at birth:

So yes, Canada’s GDP per capita is comparable to that of very poor U.S. states. So is per capita GDP in Finland, generally considered the world’s happiest nation. But Canadians appear, on average, to be more satisfied with their lives than we are, although not at Nordic levels. We don’t have a comparable number for Alabama, but surveys consistently show it as one of our least happy states.

Part of the explanation for this discrepancy, no doubt, is that so much of U.S. national income accrues to a small number of wealthy people; inequality in Canada is much lower.

And I don’t know about you, but I believe that one important contributor to the quality of life is not being dead, something Canadians are pretty good at; on average, they live more than a decade longer than residents of Alabama.

The general point here is that while GDP is a very useful measure, and is generally correlated with the quality of life, it’s not the only thing that matters. And the more specific point is that Canada, which among other things has universal health care, has some good reasons beyond national pride not to become the 51st state.

So Canada isn’t boring now, and it never was. As I said, try looking north; you might learn something.

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.

Treasury Chief Scott Bessent And The Stages Of Trumpist Economic Grief

Treasury Chief Scott Bessent And The Stages Of Trumpist Economic Grief

While much of MAGA is motivated by hatred of an open society — by racism, misogyny and the desire to end all things woke — the swing voters who put Donald Trump over the top thought they were supporting a great manager who would fix the economy, reducing grocery prices and restoring good jobs. It was inevitable that they would eventually feel buyers’ remorse, because Trump never had plans to deliver on his economic promises; on the contrary, almost everything he’s trying to do will make the economy worse.

Even so, it’s stunning just how quickly consumer confidence has fallen off a cliff:

Data via University of MIchiganwww.nationalmemo.com


What’s truly remarkable from my perspective, however, is that Trump’s economic team seems to be even more despairing than the general public.

Bear in mind that “hard” economic data ­— things like unemployment, job growth, and consumer prices — are still looking fairly benign. So you might expect Trump officials to be going on television and assuring everyone that public concerns about tariffs, DOGE layoffs and all that are overblown, that prosperity like you’ve never seen is just around the corner. Instead they’re talking about pain and why Americans should accept it.

I find myself thinking about changing rhetoric about the economy as the stages of Trumpist economic grief. So far they look like this:

1. Prices will come down right away

2. Actually, reducing prices is hard and will take a while

3. Sorry, but we need a painful economic detox

4. Hey, there’s more to life than consumer goods

5. ????

As everyone knows, during the campaign Trump repeatedly promised to bring grocery prices down on Day One of his presidency. As soon as the election was over, however, he declared that “it’s hard to bring things down once they’re up.” He didn’t quite say “Nyah, nyah, fooled you!” but he might as well have. And this reversal was completely predictable.

What has happened since then has been much more surprising. I would have expected Trump officials to wait a while, to start offering excuses for a bad economy only after the economy actually, you know, turned bad. But no, they’re already telling us to expect hard times as the economy goes through a “detox period.”

Detox from what? The semi-official line is that job growth under Biden was somehow fake, that it was all low-value government employment, and that it will be painful as we move workers back to productive work in the private sector. And some in the news media are actually buying that line. The Washington Post just ran a story with the utterly credulous headline “Trump has a plan to remake the economy. But he’s not explaining it very well.”

So, first of all, why does the economy need remaking? The claim that job growth under Biden was mainly government employment is completely false:

Source: Bureau of Labor Statistics

I don’t know whether people like Scott Bessent, the Treasury secretary, are deliberately lying, although they probably are — these aren’t hard numbers to check. One thing I’ve noticed, however, is that Republican descriptions of Democratic governance often reflect right-wing fantasies about what liberals would do rather than reality. Big cities must be crime-ridden hellscapes even though New York is one of the safest places in America; Biden must have presided over massive growth in government jobs, even though he didn’t.

The other problem with the headline is, “what plan?” DOGE has wreaked havoc on federal operations, but its claims to have saved large amounts of money appear to be vaporware. And in any case, most government employees work for state and local governments, not the federal government. So how, exactly, is the economy being “remade”?

I don’t know about you, but I don’t think Trump’s problem is that he’s doing a poor job of explaining his plan. I think his problem is that he’s offering fake answers to fake problems, and the public — unlike, apparently, the Washington Post — isn’t buying it.

In any case, the real surprise is that Trump officials are making excuses for a bad economy even though the economy isn’t actually bad — yet. Maybe they believe that their boss’s policies will do a lot of damage, realize that they have no influence over those policies, and are trying to get ahead of the curve.

But item #4 on the stages of Trumpist economic grief is even more surprising. A few days ago Bessent declared that “Access to cheap goods is not the essence of the American dream.” When asked to explain his comment on Meet the Press he sort of doubled down: “The American dream is not contingent on cheap baubles they get from China.”

OK, he didn’t exactly go all spiritual and call on Americans to reject materialism. He seemed to be saying that the American dream is really about upward mobility and affordable housing, although it’s hard to see what aspects of Trump’s policies will help on either of those fronts. But still, the evolution from promises to reduce prices on Day One to “who cares about consumer prices?” is giving me whiplash.

And does anyone expect consumers to accept this new nonchalance about inflation? I don’t. So what’s the next stage in Trumpist economic grief?

I’d say that we’re entering uncharted territory, but really we aren’t. Trump is clearly a wannabe authoritarian ruler; the only question is how successful he’ll be at turning that dream into reality. And we know how authoritarian regimes deal with economic adversity.

First, they try to hide the bad news. Trump officials have already been talking about redefining GDP in ways they imagine (wrongly) will make Biden’s economy look worse and their economy better. It seems highly likely to me that once Trump’s policies start causing inflation and possibly recession, there will be a major push to cook the economic data.

Second, they punish the bringers of bad news. As the New York Times has reported, that’s China’s approach:

Beijing has censored and tried to intimidate renowned economists, financial analysts, investment banks and social media influencers for bearish assessments of the economy and the government’s policies. In addition, news articles about people experiencing financial struggles or the poor living standards for migrant workers are being removed.

If you say that such a crackdown couldn’t happen here, you’re being naïve. In fact, it’s already happening to some extent, largely through self-censorship by media organizations. (Hello, Jeff Bezos.) If the economy worsens, expect the pressure to stay positive to become much more intense.

And bear in mind that we’re only two months into the second Trump presidency. What will things look like a year from now?

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.

QAnon Rules: The Paranoid Style In The Musk-Trump Regime

QAnon Rules: The Paranoid Style In The Musk-Trump Regime

It was predictable that the co-presidency of Donald Trump and Elon Musk would eventually face a backlash. After all, Trump’s entire campaign was built on fantasy promises -- like lowering grocery prices on day one of the Administration – that he had no way and no plans to honor. Moreover, the Administration’s actual policy agenda manages to be both deeply unpopular and economically destructive.

Even so, I admit that I am surprised at how quickly the backlash has developed. Republican members of Congress, rather than face angry denunciations by their constituents, have stopped holding town halls in their home districts. Tesla dealerships across the country are beset by protests, and in some cases vandalism. Fox News and the Wall Street Journal have both turned critical as the economy and the stock market rapidly deteriorate.

Notably, America’s oligarchs have been slow to wake up and smell the outrage. Until very recently most CEOs and large investors were bullish on Trump. But Trump’s dizzyingly erratic moves on tariffs may have finally delivered the message to the oligarch class that the Musk-Trump duo have no idea what they’re doing.

You can see this dawning revelation in stock prices. Let’s be clear: The stock market is not a good measure of how the economy is doing. It is, however, an indicator of the mood of people with a lot of money to invest. Now that reality has begun to set in, the market has given up all of the “Trump bump,” the stock gains that followed Trump’s election victory:

If you ask me, the public and especially big business are still behind the curve in understanding how much damage these people will inflict. Already we have a secretary of health and human services who responds to a major outbreak of measles by suggesting we take cod liver oil, and we have an agriculture secretary who suggests that the solution to high egg prices is to raise your own chickens. Plus we’ve destroyed our alliances and are rapidly undermining our scientific and technological capacity.

As the economy stumbles and the stock market tanks, consumer confidence lags, and even some Trump voters are losing faith, what I find particularly revealing is how the Trump cabal is responding. They aren’t rethinking their policies; they aren’t even making major efforts to justify their policies to an increasingly skeptical public. Instead, they’ve instantly descended into a pit of insane conspiracy theories.

Thus, according to Mike Johnson, the speaker of the House, those rowdy audiences at town halls aren’t citizens sincerely concerned about government layoffs and looming cuts to Medicaid; they’re “paid protestors” hired by “George Soros-funded groups”.

Gotta say, those Soros people are pretty impressive if they’ve managed to secretly hire fake protestors for town halls all across America.

What about those Tesla protests? According to Musk, they aren’t a response to his Nazi salutes and the chainsaw DOGE has been taking to crucial public services. In his mind they’re a conspiracy organized by five people, three of whom happen to be Jewish and two of whom happen to be dead:

And that big decline in the stock market? According to Trump, it’s not a response to concerns about his zigzagging tariff policies. “I think it is globalists that see how rich our country is going to be and they don't like it.” Yep, globalist Trump-haters have tanked a $48 trillion market.

If all of this sounds crazy, that’s because it is. What we’re hearing from the Musk-Trump Administration sounds, if I can use the term, distinctly un-American. It’s the kind of rhetoric you expect from an authoritarian regime that attributes every setback to sabotage by rootless cosmopolitan enemies of the state.

Then again, why should we be surprised? An excellent recent analysis by John Burn-Murdoch of the Financial Times, using data from the World Values Survey, shows that at this point the U.S. right’s values are in fact very similar to those of authoritarian regimes like Russia and Turkey, and not at all like those of Western democracies, or for that matter its own values a generation ago:

While rule by crazy conspiracy theorists is an unquestionably bad state of affairs, let me lay out two specific reasons it’s bad.

First, it means that the people in charge won’t learn from failure. When things go wrong — when planes crash, or forests burn, or children die of preventable diseases, or the economy enters stagflation — it won’t be because policies should be reconsidered. It will be because sinister globalists are plotting against America. And the beatings will continue until morale improves.

Second, there will be a search for scapegoats. Much of the federal government is already in the midst of a de facto political purge, with professional civil servants replaced by apparatchiks and job cuts falling most heavily on agencies perceived as liberal. These purges will intensify and broaden, increasingly extending to the private sector, as the administration proves itself incapable of governing effectively.

It’s a scary prospect. I only hope that enough people get scared and angry enough, soon enough, to save America as we knew it.

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.