Nobel laureate warns Americans could pay the price for Donald Trump’s trade wars

The United States has adopted aggressive trade policies under Donald Trump’s second term as President. While Trump might believe that his policies have brought in trillions of dollars, Americans across the country are still struggling to make ends meet. The tariffs that he imposed on so many countries are primarily being paid by his own countrymen and small businesses. As far as Nobel Prize-winning economist Paul Krugman is concerned, these policies will leave Americans strapped for cash in the long term.

Krugman penned a piece in Substack in which he noted how major economies around the world are adapting to the US’s recent aggression when it comes to using tariffs as weapons. He used the recent free trade agreement signed by the EU and India as an example to show how major economies around the world were diversifying to move away from the US as much as possible.

“Unlike Donald Trump, who thinks of international trade as a zero-sum game, the Europeans and the Indians understand that a free trade agreement between them is a very good deal for both parties. They are two very big economies,” Krugman explained. While there has not been any official response from Trump about the deal, the Nobel laureate believes that it is a key indicator of major economies moving away from the United States.

“But beyond the economic advantages, there is something of much greater importance happening with the EU-India deal: It’s a major step toward economic divorce from the United States by the major global economies,” he wrote. The deterioration of relations between the US and its major trading partners, coupled with Trump’s punitive tariffs, could ultimately leave Americans and American businesses significantly poorer, as per the economist. If all this turns out to be true, the Republicans are going to have a hard time in the Midterm elections.

“The world trading system as we knew it lasted for three generations after World War II. It was a rules-based system in which everyone considered the U.S. a reliable, trustworthy partner. But now, US economic relations with other nations have turned abusive, and the world is moving toward divorce. And this will make Americans measurably poorer,” Krugman added.

He is not the only one who believes that America won’t be in a good place due to the President’s policies. Billionaire investor Ray Dalio recently claimed that the country may be headed towards “capital wars,” particularly because of Trump’s Greenland stance. “On the other side of trade deficits and trade wars, there are capital and capital wars,” Dalio said. “If you take the conflicts, you can’t ignore the possibility of the capital wars. In other words, maybe there’s not the same inclination to buy U.S. debt and so on.”

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