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paul krugman
Top Finance Committee Democrat Rips Trump's New Canada Tariffs as 'Yet Another Shakedown'
Nobel Prize-winning economist Paul Krugman described Trump's latest tariffs as "unutterably idiotic."
Jul 21, 2026
Critics are piling on President Donald Trump for once again picking a fight with the United States' top trading partner by moving to slap 50% tariffs on certain imported Canadian goods.
Sen. Ron Wyden (D-Ore.), ranking member of the Senate Finance Committee, said on Tuesday that Trump's latest broadside against Canada was "yet another shakedown that will raise the cost of living for Americans, their families, and small businesses across the country."
Wyden also said that Trump has "abused every trade authority at his disposal" and vowed to soon release a bill "to rein him in and put Congress back in the driver's seat" in crafting US trade policy.
Wyden wasn't the only Democrat to take a shot at Trump over his new economic attack on Canada.
Rep. Mike Levin (D-Calif.) called Trump's new tariffs "really dumb" given that they violate a trade deal that Trump himself negotiated with Canada and Mexico during his first term.
"You cannot negotiate a trade agreement, sign it, celebrate it, then blow it up and expect anyone to trust the next deal," said Levin. "And who actually pays? American importers and American families. Tariffs are a tax on us."
Rep. Jared Huffman (D-Calif.) predicted that US consumers would once again pay the price for the president's trade war.
"We're the ones who will eat the cost," wrote Huffman. "That's what happened with Trump's last tariff spree and it will happen again. Trump's failed foreign and economic policies are making life worse for hardworking people."
Nobel Prize-winning economist Paul Krugman on Tuesday published an analysis trying to make sense of the justifications for Trump's latest trade war with Canada, but he came up mostly empty.
"The White House fact sheet claims that the new tariffs are a response to Canadian policies that discriminate against US products," explained Krugman, "notably the moves by most Canadian provinces... to stop importation of US alcoholic beverages. But these policies were themselves a response to the tariffs on Canadian goods Trump had previously imposed."
Krugman then noted that Trump shifted his justification for the tariffs, saying they were designed to punish Canada after smoke generated by wildfires in Ontario billowed into the US last week.
However, Krugman found this explanation even more absurd.
"Blaming Canada for not controlling fires that are, in reality, largely a consequence of global warming," Krugman remarked, "is unutterably idiotic."
Krugman concluded his analysis by arguing that "whatever the real motivation for these new tariffs, they are almost surely illegal," noting that they run afoul of Trump's own North American trade deal.
Trump on Tuesday indicated that the tariffs on Canada were not actually a response to the wildfires, though he said his administration was looking at separate measures to punish the Canadian government for purportedly doing a poor job of managing its forests.
Q: Are the Canada tariffs in response to the wildfires?
Trump: No, We're looking at that separately. They need us to survive. Without us, there's no way they can survive pic.twitter.com/ycllBXmPTd
— Acyn (@Acyn) July 21, 2026
Several studies have found that Trump's tariffs, which he kicked off in April 2025, have cost US businesses and consumers hundreds of billions of dollars, as importers pass most of the increased costs imposed by the tariffs to consumers in the form of higher prices.
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'You Should Be Alarmed,' Says Economist as Trump's Iran War Pushes US Gas Past $4 Per Gallon
"Talk to or read energy experts—people who focus on the physical side of the oil crisis—and their hair is on fire."
Mar 31, 2026
Gas prices in the US have surged to a four-year high, and Nobel Prize-winning economist Paul Krugman is warning that the worst is likely yet to come.
Amid a Tuesday projection from AAA that average US gas prices had hit $4 per gallon for the first time since 2022, Krugman published an analysis of the petroleum market in which he projected that the price of oil will go even higher in the coming weeks as the global economy runs into supply shortages caused by President Donald Trump's war against Iran.
Krugman argued that oil price hikes have actually been tame so far because physical supplies have remained steady in recent weeks, as tankers that had already passed through the Strait of Hormuz before the start of the war have continued making scheduled deliveries.
That "grace period," as Krugman described it, is about to end as speculative market prices run into the hard realities of physical shortages.
What this fundamentally means, wrote Krugman, is "you should be alarmed."
"Once the crisis gets physical, there will no longer be room for jawboning the markets," Krugman wrote. "Since the war began there have been several occasions on which Donald Trump has been able to talk prices down by asserting that meaningful negotiations are underway... but that won’t work once the oil runs out. So prices will have to rise."
As for how far prices will go up, Krugman calculated that with only medium disruption to global oil production and medium demand elasticity, the price of oil would rise to $152 per barrel, which would push US gas prices well over $4.50 per gallon.
Making matters worse, Krugman found that it wouldn't take much additional disruption to push the price of oil into worse-case scenarios where it would top $200 per barrel.
"If oil really does go to $200 or more, it’s all too easy to envisage a full-blown global economic crisis, with an inflation surge and quite likely a recession," Krugman commented. "Ever since this war began I’ve noticed a sharp divide in sentiment among experts. Finance and macroeconomics experts have been relatively sanguine about our ability to ride out this storm. But talk to or read energy experts—people who focus on the physical side of the oil crisis—and their hair is on fire."
Petroleum industry analyst Patrick De Haan on Tuesday highlighted the major increases in the price of diesel fuel since the start of the Iran war, which could add even more pain to the US economy in the form of higher shipping costs for goods.
"Can't overstate the impact that's coming down the pipeline to truckers, farmers, logistics, and beyond," De Haan wrote in a social media post. "The US economy runs on diesel with several states setting new all-time highs for diesel, while others are seeing largest monthly increases of all time."
De Haan also posted a chart highlighting the states with the biggest diesel price increases since late February, and it showed swing states Arizona, Nevada, and North Carolina faced the largest surges, with prices up more than 57% in just one month in each state.
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'The Situation Is Scary': Global Economic Chaos as Trump’s Iran War Sends Markets Diving
"To me, it was not just the worst-case scenario," said one economic analyst. "It was an unthinkable scenario."
Mar 09, 2026
President Donald Trump's unprovoked and unconstitutional war against Iran is sending shockwaves across the global economy in the form of skyrocketing oil prices and diving financial markets.
The prices of both Brent crude oil and WTI crude oil futures on Monday surged past $100 per barrel, as countries across the Middle East announced production cuts in the wake of chaos and destruction caused by the Iran war.
The impact of the price surge on the US stock market was immediate, as the Dow Jones Industrial Average opened Monday trading down by more than 600 points, while the Nasdaq dropped by 300 points.
According to a Monday report from the Wall Street Journal, both Iraq and Kuwait have announced oil production curbs because they have been unable to ship their supply through the Strait of Hormuz and have thus run out of space to store excess petroleum.
JPMorgan Chase analyst Natasha Kaneva noted to the Journal that this is the first time in recorded history that the Strait of Hormuz has ever been completely closed off for shipping, and warned the economic consequences would be severe.
"To me, it was not just the worst-case scenario," Kaneva said of the strait's closing. "It was an unthinkable scenario."
The Journal wrote that Trump's decision to launch a war with Iran has already sparked "the most severe energy crisis since the 1970s," which is now "threatening the global economy."
Petroleum industry analyst Patrick De Haan wrote in a Monday analysis that US drivers should expect to feel the impact of this oil shock in the coming days.
"Gasoline prices in many states could climb another 20 to 50 cents per gallon this week, with price-cycling markets potentially seeing increases as early as today," De Haan projected. "Diesel may rise even more sharply, with increases of 35 to 75 cents per gallon possible as global distillate markets react."
In a Monday analysis posted on his Substack page, Nobel Prize-winning economist Paul Krugman dove into the logistics of stopping and restarting oil production, and argued that the impact of the strait's closure will grow significantly as time goes on.
"As the Strait remains closed, producers are shutting down, and this isn’t like turning off a tap that can be quickly restarted," Krugman explained. "There’s apparently a real nonlinearity here: a two-week closure of the Strait has much more than twice the adverse impact on global oil supply as a one-week closure. If this goes on for multiple weeks... oil prices, which retreated slightly off their highs early this morning, could go much higher."
Krugman said that the shock was not yet bad enough to make an economic crisis inevitable because the US is much less dependent on oil than it was in the 1970s.
Nonetheless, Krugman cautioned, "the situation is scary."
Punchbowl News reported on Monday that the politics of the Iran war "have to worry" incumbent Republicans who were already in real danger of losing their majority in the US House of Representatives even before Trump launched an illegal war.
"With the Strait of Hormuz closed, oil prices have soared to more than $100 per barrel (from just under $70 per barrel 10 days ago)," wrote Punchbowl News. "There’s been a huge spike in gas prices nationally."
The report added that Trump has not been helping his party by expressing indifference bordering on hostility to Americans' concerns about how his war will impact their personal finances.
"Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace," Trump wrote in a Sunday Truth Social post. "ONLY FOOLS WOULD THINK DIFFERENTLY!"
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'Absolutely Massive' Price Shocks Coming as Trump's Iran War Drives Up Gas, Diesel Prices
"What should really terrify Republicans is... the futures price on wholesale gasoline," said economist Paul Krugman.
Mar 04, 2026
President Donald Trump's unprovoked attack on Iran has sent oil prices surging, and it's already hurting Americans at the gas pump.
Petroleum industry analyst Patrick De Haan reported on Wednesday that the average US price for diesel has hit $4 per gallon, the highest it's been since April 2024.
De Haan also projected that the price of diesel would keep rising in the coming days before eventually reaching a price in the range of $4.25 to $4.45 per gallon.
The average price of gasoline is now approaching $3.20 per gallon, De Haan reported, and is projected to rise to at least $3.30 per gallon in the coming days. According to data from the US Energy Information Administration, average US gas prices haven't been that high since September 2024.
Nobel Prize-winning economist Paul Krugman on Wednesday flagged data showing that the price of Reformulated Blendstock for Oxygenate Blending (RBOB) gasoline futures contracts has been going through the roof since the start of the Iran war.
"What should really terrify Republicans is RBOB—the futures price on wholesale gasoline," Krugman commented. "This is up 75 cents a gallon since its low earlier this year."
According to a Wednesday report at Market Watch, researchers at the investment bank Goldman Sachs this week raised their price forecast for Brent crude oil for the second quarter of 2026 to $76 per barrel, an increase of $10.
What's more, Market Watch noted, Goldman is projecting that the price of Brent crude could hit $100 per barrel if the Strait of Hormuz remains closed for the next five weeks due to the war.
Goldman isn't the only investment bank projecting sky-high oil prices if the Strait of Hormuz stays closed for a prolonged period, as JPMorgan Chase earlier this week projected that the price of Brent crude could top $120 if the Iran conflict drags on, according to a Monday report from Market Watch.
Robert Brooks, senior fellow at the Brookings Institution's Global Economy and Development program, said in an interview with Seeking Alpha that global investors at the moment seem to be underestimating the economic risks of a prolonged conflict with Iran, citing "a weird tendency in markets to downplay unexpected shocks when they happen.”
However, Brooks told Seeking Alpha that what's happening with the global oil market right now "is absolutely massive" and should not be ignored.
Trump so far has not outlined any end game for the war he started, and Defense Secretary Pete Hegseth on Wednesday boasted that the Trump administration was "playing for keeps" by delivering "death and destruction from the sky all day" on Iran.
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'More Chaos': Trump Hammered for Plan to Double Down on Tariffs After Supreme Court Ruling
"Donald Trump illegally stole your money," said Sen. Elizabeth Warren. "He should give it back to you."
Feb 20, 2026
President Donald Trump defiantly vowed to continue slapping tariffs on imported goods on Friday after the US Supreme Court overturned the so-called "Liberation Day" tariffs he implemented last year.
In a press conference held hours after the Supreme Court ruled against the president's tariff regime, Trump said that he had other tools at his disposal that allowed him to hit foreign products with taxes.
Among other things, Trump said he was going to issue a 10% global tariff using his authority under Section 122 of the Trade Act of 1974 that allows the president to levy tariffs to address "large and serious" balance-of-payments deficits with foreign nations.
However, as a Friday analysis by the libertarian Cato Institute explains, any tariffs enacted through Section 122 expire after 150 days without authorization from Congress, which in theory could put vulnerable congressional Republicans on the spot to vote for or against the president's signature policy this summer right before the 2026 midterm elections.
The president's decision to plow ahead with his politically unpopular tariffs drew immediate criticism from Sen. Amy Klobuchar (D-Minn.), who said during an interview with MS NOW that Trump was creating even more economic uncertainty.
"What he's done is just doubled down and tried to make it worse," Klobuchar explained, "which, of course, is going to create more cost and chaos for the American people."
Klobuchar: "The scariest part from his press conference, in addition to the continued assault on the rule of law and the Constitution, is that he plans to continue doing this ... [but] I think you're starting to see bipartisan opposition to the president's tariffs, which would… pic.twitter.com/pqniYagtyW
— Aaron Rupar (@atrupar) February 20, 2026
Nobel Prize-winning economist Paul Krugman also predicted more chaos in the months to come from Trump's trade policies, particularly when it comes to businesses that will now lobby to get back the money illegally seized from them by the president's unconstitutional tariff regime.
Writing on his Substack, Krugman argued that Trump finding alternative means to levy tariffs would not "obviate the need to refund the tariffs already collected," because "if you seized money without constitutional authority, finding other revenue sources going forward doesn’t make the original seizure legal."
David Frum, staff writer at The Atlantic, predicted that the coming lawsuits aimed at getting refunds for the illegal tariffs would be a massive mess.
"The post-tariff litigation is going to be nightmarish," he wrote on social media. "Wrongfully taxed plaintiffs will now sue for return of their illegally taken money. Can their customers then sue for a portion of the higher prices caused by the wrongful taxes? More Trump chaos."
However, US Treasury Secretary Scott Bessent downplayed the possibility of American businesses and consumers getting refunded for the tariffs.
While speaking at the Economic Club of Dallas on Friday, Bessent was asked if he expected a "food fight" for the $175 billion in tariff revenues that government has illegally collected since April.
"I've got a feeling the American people won't see it," Bessent said of the tariff money.
Bessent: I got a feeling the American people won't see the $175 billion in tariff revenue we collected pic.twitter.com/rj0Bmm0Exg
— FactPost (@factpostnews) February 20, 2026
However, some Democrats indicated that they were not simply going to let the administration getting away with money they unlawfully confiscated from US businesses and consumers.
"Donald Trump illegally stole your money," wrote Sen. Elizabeth Warren (D-Mass.). "He should give it back to you. Instead Trump is scheming up new ways to force Americans to pay even more."
Democrats on the US House Ways and Means Committee wrote that "Trump does not want to refund the money he illegally stole from you," vowing the party "won't stop fighting to get your money back."
Democratic Illinois Gov. JB Pritzker wrote Trump a letter after the Supreme Court ruling demanding that the president provide every family in his state a $1,700 refund for the tariffs, which he said "wreaked havoc on farmers, enraged our allies, and sent grocery prices through the roof."
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Latest GDP Figures Show Rich Reaping Rewards as Working Class Continues to Suffer Under Trump
"People at the top are doing fine, people in the middle and lower income brackets are struggling a bit, to say the least."
Dec 24, 2025
President Donald Trump's allies this week hyped up newly released data showing that the US economy grew by more than 4% in the third quarter of 2025, but economists and journalists who dove into the report's finer details found some troubling signs.
Ron Insana, a finance reporter and a former hedge fund manager, told MS Now's Stephanie Ruhle on Tuesday night that there is a "split economy" in which growth is being driven primarily by spending from the top 20% of income earners, whom he noted accounted for 63% of all spending in the economy.
On the other side, Insana pointed to retail sales data that painted a very different picture for those on the lower end of the income scale.
"When you look at lower income individuals, nearly half of them are using 'buy-now-pay-later' for their holiday shopping," he said. "So we have this real split... People at the top are doing fine, people in the middle and lower income brackets are struggling a bit, to say the least."
Dean Baker, co-founder and senior economist of the Center for Economic and Policy Research, also took note of this split in the US economy, and he cited the latest data showing that real gross domestic income, which more directly measures worker compensation over total economic output, grew at just 2.4% during the third quarter.
Baker also said that most of the gains in gross domestic income showed up at the top of the income ladder, while workers' income growth remained stagnant.
The theme of a split economy also showed up in an analysis from Politico financial services reporter Sam Sutton published on Wednesday, which cited recent data from Bank of America showing that the bank's "top account holders saw take-home pay climb 4% over the last year, while income growth for poorer households grew just 1.4%."
Sutton said that this divergence in fortunes between America's wealthy and everyone else was showing up in polling that shows US voters sour on the state of the economy.
"In survey after survey, a majority of Americans say they’re straining under the pressure of rising living expenses and a softening job market," Sutton said. "The Federal Reserve Bank of Boston says low-income consumers have 'substantially' higher levels of credit card debt than they did before the pandemic. Even as growth and asset prices soar, Trump’s approval ratings are sagging."
Economist Paul Krugman on Tuesday argued in his Substack newsletter that one reason for this large disparity in economic outcomes has to do with the US labor market, which has ground to a halt in recent months, lowering workers' options for employment and thus lowering their ability to push prospective employers for higher wages.
"Trump may claim that we are economically 'the hottest country in the world,' but the truth is that we last had a hot labor market back in 2023-4," Krugman explained. "At this point, by contrast, we have a 'frozen' job market in which workers who aren’t already employed are having a very hard time finding new jobs, a sharp contrast with the Biden years during which workers said it was very easy to find a new job."
None of these caveats about the latest gross domestic product (GDP) data stopped US Commerce Secretary Howard Lutnick from going on Fox News on Tuesday night and falsely claiming that a 4.3% rise in GDP meant that "Americans overall—all of us—are going to earn 4.3% more money."
Lutnick: The US economy grew 4.3%. What that means is that Americans overall—all of us—are going to earn 4.3% more money. pic.twitter.com/SIFi99NRBX
— Acyn (@Acyn) December 24, 2025
In reality, GDP is a sum of a nation's consumer spending, government spending, net exports, and total investments, and is not directly correlated with individuals' personal income.
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'An Abject Failure': Economists Trash Trump's Disastrous Job Creation Record in Year-End Reviews
"The jobs aren’t coming back, the wages aren’t rising," one economist said.
Dec 22, 2025
President Donald Trump has justified his historically high tariffs on foreign goods by promising that they would lead to a boom in domestic manufacturing jobs in the US.
However, in year-end reviews of the US job market, three economists make the case that Trump's record on creating manufacturing jobs has been a massive bust.
Mike Konczal, senior director of policy and research at the Economic Security Project and a former member of President Joe Biden’s National Economic Council, argued in his personal newsletter on Friday that the Trump administration's efforts to reorganize the US labor market away from service sector jobs have completely failed.
In particular, he found that jobs in manufacturing, mining, and logging have all declined throughout the first year of Trump's second term, while jobs in construction have remained mostly flat after years of steady growth during former President Joe Biden's administration.
What's more, the administration's stated goal of opening up more jobs for native-born US workers by conducting mass deportations of immigrant workers has also flopped, as native-born unemployment has been higher in 2025 than in either of the last two years.
"The bleak irony is that even after sacrificing real prosperity to chase this 4chan-level political economy, they still won’t achieve their goal," Konczal concluded. "The jobs aren’t coming back, the wages aren’t rising, and family formation won’t be rescued by trying to rewind the labor market to a world that never existed in the first place."
Nobel Prize-winning economist Paul Krugman concurred with Konczal's assessment of the US labor market in an analysis published Monday in which he described Trump's record on jobs as "an abject failure."
Krugman argued that Trump's war on clean energy projects is almost certainly making the situation even worse by killing blue-collar manufacturing and construction jobs in the wind and solar industries.
"Trump has scrapped Biden’s green energy policies in favor of tariffs and fossil fuels," Krugman noted. "But it isn’t working. Instead, employment in 'manly' sectors has fallen since Trump took office."
Additionally, said Krugman, Trump's plan to use tariffs to bring back manufacturing jobs to the US was always destined to fail given the realities of how modern economies work.
"In the modern world nations mostly don’t sell each other completed consumer goods," he explained. "Instead, the majority of trade involves sales of goods that are used to produce other goods... What this means in practice is that tariffs, which raise the prices of those capital goods and inputs, raise the production costs of US manufacturers, in many cases making them less competitive with foreign producers."
Ball State University economist Michael J. Hicks, in a column published Monday by the Indianapolis Star, also pointed the finger at Trump's tariffs when explaining his failure to revive US manufacturing.
Hicks argued that the damage the president's policies have done to manufacturing won't be undone any time soon.
"The US is in the early days of a manufacturing contraction that will run through most of 2026, even if the tariffs are lifted today," he warned. "We should call it the deindustrialization of America. All of this flies in the face of the nonsensical claims of a manufacturing renaissance or onshoring that would bring factory jobs back to the US."
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Economists Warn Trump Attack on Fed Will Further Jack Prices for Working Families
"Confidence that the Fed will respond wisely to future periods of macroeconomic stress... will evaporate," warned one economist.
Aug 29, 2025
Economists are warning that US President Donald Trump's efforts to meddle with the Federal Reserve are going to wind up raising prices even further on working families.
Michael Madowitz, principal economist at the Roosevelt Institute, said on Wednesday that the president's efforts to strong-arm the US central bank into lowering interest rates by firing Federal Reserve Gov. Lisa Cook would backfire by accelerating inflation.
"The administration's efforts to politicize interest rates—an authoritarian tactic—will ultimately hurt American families by driving up costs," he said. "That helps explain why Fed independence has helped keep inflation under 3%, while, after years of political interference in their central bank, Turkey's inflation rate is over 33%."
Heidi Shierholz, the president of the Economic Policy Institute, said that the president's move to fire Cook "radically undermines what Trump says his own goal is: lowering U.S. interest rates to spur faster economic growth."
She then gave a detailed explanation for why Trump imposing his will on the Federal Reserve would likely bring economic pain.
"Presidential capture of the Fed would signal to decision-makers throughout the economy that interest rates will no longer be set on the basis of sound data or economic conditions—but instead on the whims of the president," she argued. "Confidence that the Fed will respond wisely to future periods of macroeconomic stress—either excess inflation or unemployment—will evaporate."
This lack of confidence, she continued, would manifest in investors in US Treasury bonds demanding higher premiums due to the higher risks they will feel they are taking when buying US debt, which would only further drive up the nation's borrowing costs.
"These higher long-term rates will ripple through the economy—making mortgages, auto loans, and credit card payments higher for working people—and require that rates be held higher for longer to tamp down any future outbreak of inflation," she said. "In the first hours after Trump's announcement, all of these worries seemed to be coming to pass."
Economist Paul Krugman, a former columnist for The New York Times, wrote on his personal Substack page Thursday that Trump's moves to take control of the Federal Reserve were "shocking and terrifying."
"Trump's campaign to take over monetary policy has shifted from a public pressure to personal intimidation of Fed officials: the attack on Cook signals that Trump and his people will try to ruin the life of anyone who stands in his way," he argued. "There is now a substantial chance that the Fed's independence, its ability to manage the nation's monetary policy on an objective, technocratic basis rather than as an instrument of the president's political interests and personal whims, will soon be gone."
The economists' warnings come as economic data released on Friday revealed that core inflation rose to 2.9% in August, which is the highest annual rate recorded since this past February. Earlier this month, the Producer Price Index, which is considered a leading indicator of future inflation, came in at 3.3%, which was significantly higher than economists' consensus estimate of 2.5%.
Data aggregated by polling analyst G. Elliott Morris shows that inflation is far and away Trump's biggest vulnerability, as American voters give him a net approval of -23% on that issue.
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'Art of the Stupid Deal': Trump's Japan Trade Pact Bashed by Automakers, Unions, Economists
“American workers are once again being left behind,” said the United Auto Workers.
Jul 25, 2025
President Donald Trump this week announced that he had cut a deal with Japan that would lower tariffs on Japanese cars to 15%, which was a cut from the 25% tariffs that he'd originally placed on them.
However, many of the parties whom Trump claimed he was trying to help are not happy with the deal, including major automakers and unions representing hundreds of thousands of workers.
Matt Blunt, president of the American Automotive Policy Council that represents America's "Big Three" automakers, told The Associated Press this week that the deal Trump struck with Japan leaves U.S. automakers "at a disadvantage" compared to their Japanese competitors given that "this is a deal that will charge lower tariffs on Japanese autos with no U.S. content."
The United Autoworkers (UAW) similarly blasted the deal, saying it makes clear that "American workers are once again being left behind."
"This deal hands a win to transnational automakers that rely on low-road labor practices: Substandard wages, excessive temps, and union-busting," said UAW in a press statement. "Now, those same companies stand to benefit from lower tariffs, while unionized automakers—who could quickly create tens of thousands of good jobs using existing capacity—are left with fewer incentives to do so. Once again, American workers are being forced to suffer the consequences."
As Nobel Prize-winning economist Paul Krugman explained on his Substack page on Friday, these stakeholders have good reason to feel burned by what he calls Trump's "art of the stupid deal."
In the first place, the current arrangement leaves in place 25% tariffs on car components produced in Canada and Mexico, both of which are vital parts of the American manufacturing chain. Trump has also left in place 50% tariffs on foreign steel and aluminum, which will further drive up U.S. automakers' input costs and leave them at a disadvantage with Japanese competitors who can still access foreign steel and aluminum at much cheaper prices.
"Overall, the interaction between this Japan deal and Trump's other tariffs probably tilts the playing field between U.S. and Japanese producers of cars, and perhaps other products, in Japan's favor," Krugman explained. "If this sounds incredibly stupid, that's because it is."
Krugman then speculated that "Trump's negotiators probably had no idea what they were doing, and didn't realize that in their frantic rush to conclude a deal they were agreeing to tariffs that would be highly unfavorable to U.S. manufacturing." He added that negotiators were under so much pressure due to the ridicule he's faced for "having made big promises about his ability to negotiate trade deals, then coming up empty month after month."
University of Michigan economist Justin Wolfers appeared on MSNBC earlier this week and outlined why Trump's Japan deal was still a net loss for American consumers even though Trump was lowering the earlier tariffs he had set on Japanese cars.
"If you began by saying that [the] tariff on Japan has gone from 25% to 15%, it would feel like he'd negotiated a great deal," Wolfers said. "That's not what happened here."
He then explained that tariffs on Japanese goods before Trump took office were just 2%, which means that "the biggest thing Trump has done is he's raised taxes on Americans who import goods from Japan from 2% to 15%."
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2% Wealth Tax on Just 3,000 Billionaires Could Raise $250 Billion a Year: Nobel Economists
"Not only is it necessary to impose a stronger burden of justice on billionaires, but more importantly, it is possible."
Jul 07, 2025
Seven Nobel laureates on Monday published an op-ed advocating for "a minimum tax for the ultrarich, expressed as a percentage of their wealth," in the French newspaper Le Monde.
"They have never been so wealthy and yet contribute very little to the public coffers: From Bernard Arnault to Elon Musk, billionaires have significantly lower tax rates than the average taxpayer," wrote Daron Acemoglu, George Akerlof, Abhijit Banerjee, Esther Duflo, Simon Johnson, Paul Krugman, and Joseph Stiglitz.
Citing pioneering research from the E.U. Tax Observatory, the renowned economists noted that "ultrawealthy individuals pay around 0% to 0.6% of their wealth in income tax. In a country like the United States, their effective tax rate is around 0.6%, while in a country like France, it is closer to 0.1%."
Although the "ultrawealthy can easily structure their wealth to avoid income tax, which is supposed to be the cornerstone of tax justice," the strategies for doing so differ by region, the experts detailed. Europeans often use family holding companies that are banned in the United States, "which explains why the wealthy are more heavily taxed there than in Europe—though some have still managed to find workarounds."
The good news is that "there is no inevitability here. Not only is it necessary to impose a stronger burden of justice on billionaires, but more importantly, it is possible," argued the economists, who say that taxing the overall wealth of the ultrarich, not just income, is the key.
The wealth tax approach, they wrote, "is effective because it targets all forms of tax optimization, whatever their nature. It is targeted, as it applies only to the wealthiest taxpayers, and only to those among them who engage in tax avoidance."
💡 "One of the most promising avenues is to introduce a minimum tax for the ultra-rich, expressed as a percentage of their wealth."Seven Nobel laureates in economics advocate for the Zucman tax in their latest op-ed.Read the full @lemonde.fr article 👇www.lemonde.fr/idees/articl...
[image or embed]
— EU Tax Observatory (@taxobservatory.bsky.social) July 7, 2025 at 8:05 AM
The anticipated impact would be significant. As the op-ed highlights: "Globally, a 2% minimum tax on billionaire wealth would generate about $250 billion in tax revenue—from just 3,000 individuals. In Europe, around $50 billion could be raised. And by extending this minimum rate to individuals with wealth over $100 million, these sums would increase significantly."
That's according to a June 2024 report that French economist and E.U. Tax Observatory director Gabriel Zucman prepared for the Group of 20's Brazilian presidency—which was followed by G20 leaders' November commitment to taxing the rich and last month's related proposal from the governments of Brazil, South Africa, and Spain.
"The international movement is underway," the economists declared Monday, also pointing to recent developments on the "Zucman tax" in France. The French National Assembly voted in favor of a 2% minimum tax on wealth exceeding €100 million, or $117 million, in February—but the Senate rejected the measure last month.
The economists urged the European country to keep working at it, writing that "at a time of ballooning public deficits and exploding extreme wealth, the French government must seize the initiative approved by the National Assembly. There is no reason to wait for an international agreement to be finalized—on the contrary, France should lead by example, as it has done in the past," when it was the first country to introduce a value-added tax (VAT).
"As for the risk of tax exile, the bill passed by the National Assembly provides that taxpayers would remain subject to the minimum tax for five years after leaving the country," they wrote. "The government could go further and propose extending this period to 10 years, which would likely reduce the risk of expatriation even more."
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