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The other day, Donald Trump announced that he will reduce tariffs for a huge amount of imported beef as a way to bring down soaring beef prices. At the same time, he's escalating his trade war with Canada, wildly threatening a whole range of new tariffs for all kinds of products. The new beef policy is already stirring opposition from his own constituencies like farmers
and ranchers.
The war on Canada, meanwhile, will hurt a lot of people in Trump country in other ways.
But taken together, these two moves underscore a whole new level of contempt for his own voters. They expose the deep folly of maga economics in all kinds of clarifying new ways. So we're talking about all of it with the best out there at explaining these things, economist Paul Craigman.
Paul, good to have you back on. Good to be on. So let's start with this beef announcement. Trump declared that the US will now allow 300,000 additional metric tons of ground beef product to be imported without an additional tariff.
Trump claimed he has a commitment that this beef will be sold at 25% below market prices.
“Paul, can you explain what Trump thinks he's saying here?”
The short answer is no, I have no idea of what you think he's saying. This is really weird. I mean, the first question is, where's the beef or actually where's the beef coming from?
This is an amazing thing.
We're, you know, he says we're going to bring in 300,000 metric tons of beef, but won't save from where. And, you know, that's, among other things with all of these food safety scares, you know, I think people would like to know who's, who's supplying this beef, and anyways, that's kind of weird in itself.
And it's also, here, our beef import policy was pretty weird to start with. It's a tariff quota where you bring in a certain amount free of tariff, but then after that, it pays a tariff. And this is supposed to be in addition to the quota part. But normally we think of a tariff quota as being, well, you know, the price of beef is
set by the marginal ton of beef, which is, which pays a tariff. So who's getting, you know, this is somebody's gained the right to import a bunch of beef, but it's not. It'll clear why this should be passed onto consumers. And now he's saying, he's got a commitment that it will be sold at 25% less and a commitment
from whom? I mean, you know, even if the wholesaler's sell a cheaper, how does the supermarket know,
“this is that imported beef that we're supposed to sell?”
So the whole thing is kind of, it's, it's in co-hero, you know, I can't imagine that anybody sat down to try and figure out how this will work. It just has this feeling of, I wanted to say something. And, and again, contempt, and, you know, consumers will not notice it in the supermarket, but ranchers definitely will.
Right. As far as I can tell, we don't even know at this point which countries this beef will come from. And there's no like, there's no clear way that Trump can even guarantee that it will be sold at a discount.
Can he? I mean, even if some beef importer said, I'm importing this at a discount because this country is selling it to us for cheaper, would he even be able to guarantee it then? Yeah. I mean, the beef importer might, you know, maybe the beef importer
will promise Trump or promise the officials that he'll sell it below the price of other beef and maybe that would even happen. But then, you know, you and I don't buy our hamburgers from beef importers. We buy them from, from, from, from supermarkets.
“So how, how does that get, how does it need that habit?”
I mean, the Trump complaints about communists, but, you know, this is not a communist economy in which government gets to set the price at which hamburger is sold in the supermarket. So it, it, it's, it's all kind of, it's, it's bizarre.
It's clearly, it's meant to say, I am doing something without anybody as far as
we're going to tell being clear about exactly what it's being done or why it should
work. Well, what strikes me about all this as well is that it's yet another admission that Trump's tariffs actually do raise the prices for American consumers. Trump has insisted 50,000 different ways that other countries pay his tariffs. Yet here he comes right out and says that reducing the tariffs will mean lower prices
for consumers.
“I mean, doesn't that sort of show an extraordinary level of contempt for his own voters?”
Oh, yeah. I mean, every bit of this, every bit of the policy from the beginning has been contempt, belief that, that people will not understand what I'm doing, you know, which is helped by the fact that he himself does not understand what he's doing, but still, but yeah, I mean, how can you say foreigners pay the tariffs and, by the way, I will help
you by making them not pay the tariffs. And so, but I, this doesn't, this, this does not sound to me like any kind of thought out policy. This is, this is thrashing. And I would ask, by the way, that even if I don't see how this actually helps consumers,
but it's, it was nine weeks till the midterms. The idea that this is going to change people's views about Trump economic policy aside from the fact that you're going to have a few thousand really pissed off beef producers. How does this even work politically? Yes, and we should be clear that the contempt is directed at his own voters.
Don't you think? Because the number one, as you and I have discussed on here before, and you've written a number of times on your great sub-stack, the people who are getting clobbered by Trump's tariffs, a lot of them are mega voters, a lot of them are Trump voters. And so, he's clearly trying to talk to them.
I mean, he's elsewhere being quoted saying that he's essentially begging his voters to turn up in the midterms, because they won't turn out without him on the ballot. So, he's essentially trying to fool very, very directly his own people here, isn't he? Yeah, I mean, he's trying to claim that he's doing something for consumers, and he's also, and this is, you know, that there's a lot of hamburger eating mega voters, and, yeah,
“and who he hopes won't remember that he's talking to have two sides of his mouth on what tariffs”
do to their due to prices. And then, and then there's also, he's, I guess, taking for granted, I mean, this is not
good for the farm sector, which is, you know, very, very Trumpy or was, and he's basically
saying, I don't think you'll vote for my people regardless. And, you know, he might be right, but at this point I was starting to wonder about that. Well, speaking of which we're in a similar situation with Canada, Trump's trade talks with Canada collapsed over the weekend, that's triggered 50% American tariffs on a range of Canadian goods, Canada's now set to retaliate, which seems to be aimed at a number
of things that will hurt Trump country. This has enraged Trump, who's now vowing to impose 50% tariffs on cars, trucks, and auto parts starting in January. Now my understanding of this is that the auto industry has such tightly integrated supply chains across the border that people call it the Great Lakes Super Cluster, right, which
is a great phrase.
“Can you explain all this, how bad this part of it is?”
Yeah, I mean, there is no U.S. auto industry. Not now. I mean, we've had free trade, we had a free trade agreement on autos with Canada in 1966. We've had free trade in autos and auto parts for that law for 60 years. We had a free trade agreement across the board with Canada in 1988.
We had NAFTA in 1994, and then you'll Trump stock a few, you know, basically had his
name inscribed on it and called it the U.S. M.C.A. in his first term. The point being that we are generations past the point when there was a U.S. auto industry as distinct from a Canadian auto industry. It's been a completely integrated thing where the components of a car can cross that border six or seven times before it ends up as a finished car assembled, you know, sometimes
on our side of the border, sometimes on theirs, but it really doesn't matter. It was so tightly integrated that most of the statistics on metropolitan areas have a metropolitan area called Detroit Windsor, where Windsor is the Canadian half of it because
It's effectively just one city, you know, this is, this is, we are that tight...
So now you suddenly slap 50% terrorist on this, which is among other things, a blatant
“violation of a solemnly assigned U.S. agreement signed by none other than Donald Trump.”
And, you know, it, you're left with the different pieces of an automobile, the, the plants that made those different pieces are on opposite sides of that sudden terrible. So it's enormously destructive.
You mean the policy that the trade agreement that Trump signed during his first term?
Can you talk about how what he's doing would directly violate that particular deal? Well, I mean, it's a free trade agreement. I mean, it was recently the North American free trade agreement, which he awkwardly renamed the U.S.-Mexico-Canada agreement, but it, it's a free trade agreement, which means that Canadian products, you know, with, there are some exceptions, U.S., but for the most
part, goods produced in either country are supposed to cross the border, tear free. It's not quite, I mean, the Europeans have a custom union, which means that there basically is no border. There is a border.
“You have to basically wave a sheet of paper at the inspector that says these are American”
products. So they get to cross free, but, but there is no tariff. That's what, that's what a free trade agreement is, goods enter free of tariff. Now Trump is saying, oh, yeah, but we're actually imposing 50 percent tariffs on a bunch of these products that we, it's, it's not strictly a treaty, but that's a very legalistic
distinction. It is a binding agreement. How large part of the point of these agreements, by the way, is to create certainty. So businesses can plan that, from, from now on, I can produce, I don't know, I actually know with, but I can, I can do engine blocks in Ontario and, and wiring frames in Michigan.
And I don't need to worry about paying a tariff when I truck them across the border.
Now all of a sudden, wow, and, and the problem is that the, with the engine block factory
and the wiring frame factory and different size of the border, you screwed up the entire production process for both countries. If you're enjoying this episode and want to get even more out of the DSR network, you need to check out our sub-stack. The DSR network sub-stack is the absolute best way to follow deep state radio.
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“And for our more dependent on Canada, then people realize, can you talk about that? Because I think it's something that a lot of people don't know.”
Yeah, it's one of those things, but I have learned a lot of in these Trump years, because we've had so many disruptions, that when you get granular on international trade, it turns out that there's a lot more sort of crucial Interdependence than you might realize. So, you know, America proves it a lot longer. And we import something like a fifth of our lumber for Canada, you think, well, okay, but we're 80% self-sufficient, but it turns out that lumber isn't lumber. That is different kinds of trees. And they have different properties. And it turns out that the Canadian trees are higher strength to weight ratio than the US trees, which means that they're what you want to use when you're framing a house.
So suddenly, and it's like 90% of that kind of lumber comes from Canada. So suddenly, we don't, yeah, yes, we do need Canadian lumber.
You know, give us 10 years, I don't know how long it takes to grow the right ...
Oil, US is a net exporter of oil, thanks to fracking. So you can say, well, we don't need Canadian oil, except that the Canadian oil goes to the upper Midwest, which cannot easily get the oil from someplace else.
The Canadian oil is different. It's, you know, again, the details. It's heavier crude, which turns out to be important for some purposes.
So actually, no, we, yeah, we have lots of oil in America, but not the right kind of oil and not in the right places, and so on down the line. So the, the, oh, and electricity, I mean, I happen to be in the northeastern United States at the moment, and, you know, hydropower from Quebec is an important part of what keeps the lights on here. So this idea that we don't need Canada is just all wrong. We, uh, abrupt, and if you cut it off abruptly as is now happening, uh, it's a mess.
“What's going to happen if this trade war continues to spiral out of control? Is it going to, what, what do you predict? Well, I think it's going to spiral out of control.”
I mean, I don't know how deep and we get, but, uh, the, you know, the, uh, first of all, again, you know, we have a midterm election in nine weeks.
There's going to be a lot of disruption starting, you know, light tomorrow because of this, of this trade war. They will not be time, even if Trump suddenly says, oh, well, all is forgiven, uh, the effects will be there. And certainly the psychological effects will be there.
“And, um, I don't think it ends quickly because, uh, look, fundamentally, Trump is going to lose this trade war, or, uh, it's, it is not, not because the, we'll be hurt worse than the Canadians.”
They, we are bigger. They will be hurt worse than we are, but the Canadians know what, why they're fighting.
They're going to need to know what, what they're, the Canadians know that Donald Trump is the villain, they know that it's bad, and, and while they're, and you had to search really hard to find an American who has, who hates Canada. You know, uh, uh, it's, uh, it's just even a majority of Republicans think that Canada is good. It's come down a bit under Trump, but still. And so the Canadians are going to dig in. They're, they have, you know, the, um, even really pretty bad Canadian politicians are fooling over each other to denounce Trump and say we will, we will stand for, so this is going to be a war that the Canada is not going to cave.
“And, and by the way, Carney, Mark Carney prime minister of Canada has a 60% approval rating, you know, and 30% disapproval. It's, it's Trump upside down. So the, uh, and, um, but Trump cannot admit that he's lost.”
It's, and it's this kind of, uh, trade version of Iran, you know, he lost the Iran war months ago, but cannot bring himself to admit it. And the, uh, the trade war with Canada, surely will follow the same pattern. So gosh, this is, this is not going to be over. This is going to be, you know, I did, at, at some level, it may end with Canada joining the European Union. I don't know. Yes, well, in fact, I think Mark Carney said in his speech today that he, that this is encouraging him to try to, you know, pursue more talks with, with Europe. And I think this is another symptom or sign of something you've gotten that before, which is that Trump's craziness is causing the rest of the world to move on without us.
And, and imagine a post-American world in which they start to work together, maybe more than they would have before. Yeah, it's what's saying, by the way, that this is not just psychology and future attitudes, but concrete steps are happening because of this. The Canadians are building pipelines that will take oil from Alberta to the Pacific. So they can sell it to Asia instead of selling it to us. You know, there's going to be a, uh, when this, assuming that sanity returns the United States, we will enter a world in which physical facts have been created that make us less influential, less able to conduct productive business with our northern neighbor.
Well, I want to try to juxtapose these two things. So on this one front, you've got Trump essentially admitting that his tariffs raised prices on consumers, he's doing that by suspending tariffs on beef in order to bring down prices.
He admits there, my tariffs raised your prices, right?
Yeah, I mean, I would, uh, I think we, we have to stop at this point imagining that there's any rational calculation behind any of these policies that what we're seeing now is a flailing guy who is, you know, losing it personally as well as politically. As some level knows that he's losing it, he's lashing out and it's, uh, you know, I'm kind of worried about, uh, at a certain point as it's all going to hell and assuming that midterms go really badly for Republicans.
Trump won't say, I need to reconsider what have I been doing wrong. He is going to, he's going to blame America. You know, we have failed him not the other way around.
My imagination isn't good enough to think of all the destructive things he might do, but there really is a kind of a downfall feeling to all of this. Well, just to wrap this up, it seems like all these things kind of get at something about mega economics if that's an actual thing. We keep hearing these accidental admissions from Donald Trump about his own policies, so a couple times now in the last year and a half he's admitted that he probably should suspend deportations of immigrants who work in the agricultural industry.
“I think of one point he actually said something like, you know, my, you know, people in the farm industry are losing good, hardworking people and by that he meant the same people he calls rapists and murderers, meaning immigrants.”
So there he admits that mass deportations, his mass deportations are bad for the economy, right? So you got that. Now you've got this new admission that tariffs actually raised the prices of consumers. I think maybe on some level there's a a tick in the punt in a habit in the punt of tree, which was tempted to sort of see Donald Trump's victory in 2024 as a sign that there's like a deep and authentic conservative right wing populist nationalists streak in the American people, but now you're getting every one of the pillars of that.
Meaning the pillars of this kind of right wing economics, mega economics, nationalist economics all get thoroughly discredited.
Is there, do you think that's happening and is there like an opening to come back into this debate for Democrats and liberals to say, okay, you now know populist nationalism failed.
“Now let's go back to the way liberals do things. What do you think of all that?”
I am I'm touring on this. I mean on the one hand, I think the case that magnomics to the extent it is coherent at all doesn't work. I think that is really sinking in and it is I mean, I mean, we're at this point Trump's economic approval numbers are getting down to where we used to think there was a hard core of like 33% who would support anything. I think we're about to breach that looks like we're going down to the number of people who actually approve of his economics may well drop into the 20s.
And so that really isn't there, but then of course this was never mainly about economics. It was always much more about race about misogyny about whatever the these cultural emotional issues.
So that probably won't go away. I mean, but hopefully we can function as a country with with 70% of the population believing in rational economic policy. And yeah, I mean, I know that we'll never see it in it, but you just not a day comes by that I don't wish for the days when you know Biden made mistakes and things went wrong.
“But he did not have completely irrational idiots making policy. There were actually good dedicated people who knew something and I think I'm not alone. I think a lot of people are starting to feel that way again.”
I do wonder whether there's finally an opportunity to do what Democrats have failed to do for so long, which is say in a straightforward way when Republicans run things it all goes to shit when Democrats run things they get better. Now Trump's way of running everything into the shitter is different than George W. Bush's, but the pattern does apply, right? I mean, this this is the story of our lifetimes more or less isn't not poll and is there a way for Democrats to recapture that story and tell it in a way that persuades people that when Democrats run things they work better even if they're not perfect.
Is there a way to break from this pattern where the electorate just lurchs us...
It did of course the answer is I don't know, the politics is kind of mysterious, but I would say look look look look at Canada where you have a a a technocratic a prime minister who you know, one of the few world leaders I actually know because I met him at many central bankers meetings over the years, right?
“Former Governor of the Bank of England and competent and immensely popular.”
Now it happens that he's pretty good at wearing a hockey shirt, but still it does show that you can do that and maybe in the end we are not most of us not that different from Canadians.
I think that the same kind of thing can work here, so let's hope so. I mean, the God knows if if anybody the next time somebody thinks that Republicans are better at running the economy, you just need to say two words Donald Trump and that'll probably solve the problem. I hope that that's true and it's really tempting to believe it and it does seem like Donald Trump has made that more possible and it has been in the past. Folks make sure to check out Paul Krugman's sub stack. It's a wonderful piece of work every day and in day out you learn from it. Paul, thank you so much for coming on as always. We really appreciate it.
Thanks for having me.
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