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Trump Has Already Lost His Pricey China Trade War, Paul Krugman Warns

By Mary Papenfuss

Nobel Prize-winning economist Paul Krugman warned Sunday that President Donald Trump is handing China what it wants as the nations negotiate the beginning of the end of a trade war that cost the American public billions of dollars.

“However Trump may try to spin this, he lost,” Krugman, a columnist for The New York Times, explained in a series of tweets. China learned, as did North Korea, that “Trump talks loudly but carries a small stick, and can be rolled,” he noted.

Going in to the end of the year, Trump is going to be claiming victory in his trade war. The truth is that there are almost never winners in trade wars — but there are losers. And however Trump may try to spin this, he lost 1/

— Paul Krugman (@paulkrugman) December 15, 2019

Trump has declared that the U.S. is close to reaching a “Phase One” agreement with China. The deal is not yet finalised, nor have details been released.

But Krugman argues that China “hung tough” and is “basically ending up” where it started — buying American agricultural products while continuing to sell “increasingly sophisticated” manufactured goods to the U.S.

That’s certainly how the Chinese see it. Trump tried to bully them; they hung tough; and are basically ending up where they started, buying agricultural products while selling us increasingly sophisticated manufactured goods 2/ https://t.co/akDz4MGiIz

— Paul Krugman (@paulkrugman) December 15, 2019

Key victims of the Trump’s trade war with China, meanwhile, have been American consumers because “despite many, many false claims by Trump,” they were stuck paying massive tariffs imposed on Chinese imports by the president, Krugman noted.

One reason is that despite many, many false claims by Trump, US consumers paid the tariffs — which we can see by the fact that Chinese export prices didn’t fall 3/ https://t.co/K93ykcgEffpic.twitter.com/2YKx5GWT2s

— Paul Krugman (@paulkrugman) December 15, 2019

Actually US export prices to China fell more, probably bc the Chinese found it easier to find alternatives to US soybeans etc than we found alternatives to Chinese products 4/ pic.twitter.com/2wZ942EqBO

— Paul Krugman (@paulkrugman) December 15, 2019

In addition, a gargantuan bailout for American farmers hit by retaliatory tariffs in Trump’s trade war is also being shouldered by U.S. consumers. The aid — likely to hit $28 billion over two years — was not offered to any other American industry hurt by the trade war, only a segment of the population credited with Trump’s presidential victory. The bailout is twice the size of the 2009 auto industry bailout provided by the Obama administration during the recession, Krugman pointed out.

As a result, farmers have suffered, with a number going bankrupt, despite a bailout *twice the size of Obama’s auto bailout* 5/ https://t.co/hZlIEojcvz

— Paul Krugman (@paulkrugman) December 15, 2019

Yet despite the aid, farms are still going under, with bankruptcies up 24% this year.

Even with a “sustained deal” — “which is still far from certain,” Krugman noted, the US will face major fallout from a mismanaged negotiation. “Trump has made us weak, neither trusted by our allies nor feared by our enemies,” Krugman tweeted.

Furthermore, even if we do get a sustained deal — which is still far from certain — the whole episode will have two big long-run costs. First, business uncertainty about capricious policy is here to stay 6/ https://t.co/bLKZCf4mI8

— Paul Krugman (@paulkrugman) December 15, 2019

Second, the Chinese have learned the same lesson North Korea’s Kim learned: Trump talks loudly but carries a small stick, and can be rolled. Trump has made us weak, neither trusted by our allies nor feared by our enemies 7/

— Paul Krugman (@paulkrugman) December 15, 2019

Krugman conceded that a lackluster deal may not hurt Trump politically. “Elections turn not on how good things are, but on whether they’re perceived as getting better,” he pointed out. “This actually gives politicians an incentive to do stupid things for a while, then stop around a year before the election. Sound familiar?”

Now, Trump may not suffer politically. Elections turn not on how good things are, but on whether they’re perceived as getting better. This actually gives politicians an incentive to do stupid things for a while, then stop around a year before the election. Sound familiar? 8/

— Paul Krugman (@paulkrugman) December 15, 2019

Also on HuffPost

Via:: https://www.huffingtonpost.co.uk/entry/trump-has-already-lost-his-pricey-china-trade-war_uk_5df735bbe4b0ae01a1e2e12e