Politics Magazine

Trump's Tariffs Will Damage U.S. Credibility And Economy

Posted on the 29 January 2025 by Jobsanger
Trump's Tariffs Will Damage U.S. Credibility And Economy
The following is part of a post by Nobel Prize economist Paul Krugman:

 It looks quite likely that Trump will indeed impose high tariffs on our neighbors a few days from now. I don’t know that this will happen, and even if he does he may find some reason to reverse the tariffs a few days later. But I don’t think people fully realize how damaging even temporary tariffs on Canada and Mexico would be.

For one thing, the North American Free Trade Agreement — which Trump renamed the U.S.-Mexico-Canada Agreement after some mostly cosmetic changes — is, in effect, a contract that everyone assumed was binding. NAFTA wasn’t a declaration of principles or intentions; it was a formal pact permanently eliminating most tariffs and other barriers to trade across our northern and southern borders.

Now a U.S. president is threatening to ignore this pact and unilaterally slap on high tariffs. In which case you have to ask, what’s the point of negotiating with the United States? What’s an agreement worth if a U.S. president can decide to ignore the agreement whenever he feels like it?

Of course, the loss of U.S. credibility extends to areas far beyond economics. In the future, what country in its right mind will trust U.S. guarantees that it will protect that nation’s security? . . .

So even if Trump only imposes tariffs briefly, we can expect companies to start planning for an era in which solemn trade agreements are treated like mere suggestions, subject to revision or abrogation at the whim of whoever sits in the White House. This will lead to a gradual reduction of the geographical integration of North American industry — a gradual shift toward national self-sufficiency. And this in turn will degrade our industrial efficiency and competitiveness.

If Trump really does impose those tariffs and keeps them in place, the economic disruption will be immense. But even if he doesn’t, the United States has already suffered a damaging loss of credibility. And credibility, once lost, is hard to regain.


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