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Trump's Autocracy Is A Rude Awakening For His Small Business Fans

Trump's Autocracy Is A Rude Awakening For His Small Business Fans

One odd feature of U.S. politics is that businesspeople, especially small business owners, always seems to believe that they will do better under Republicans, even though history shows that business does better under Democrats. Small business owners supported Trump in the last election, despite ample evidence that he would be very bad for business.

And now they’re getting a rude awakening.

Let’s talk for a second about price controls.

A few weeks ago Viktor Orban, Hungary’s de facto dictator and a darling of the MAGA set, announced that he was imposing profit-margin caps — basically price controls — on groceries. I intended to write something about that as a warning that something similar might happen in the United States, that businesspeople were fools if they assumed that Donald Trump was on their side.

Unfortunately, I never got around to writing that post. So I missed my chance to be prophetic, because it has already happened: Trump reportedly told auto executives sometime in March not to raise prices in response to tariffs. He denies that he said it, but the reporting looks solid. His headline-making assertion that he “couldn’t care less” about rising car prices seems to have been about imported autos, not domestic production.

The reason I expected Trump to follow in Orban’s footsteps is that Trump, like Orban, clearly doesn’t have any fixed principles other than power and self-aggrandizement. Under Trump, policy won’t reflect any consistent ideology. It will, instead, change with his perception of personal advantage, his temper tantrums, his whims and his malignant narcisissim. If he doesn’t like rising prices, he’ll try to stop inflation through bullying.

In short, MAGA will be very bad for business.

Most immediately, it seems as if Trump doesn’t care that his tariffs will raise business costs in addition to raising prices for consumers. We’ll get a better sense of how much costs will rise after “Liberation Day,” the big announcement of new tariffs planned for Wednesday. (War is peace, freedom is slavery, tariffs are tax cuts.) But the increase has already begun.

Indeed, thanks to tariffs already in effect the U.S. economy is already getting unscrewed, with manufacturers having a hard time keeping their stuff together.

You see, steep tariffs on steel and aluminum were the opening salvo in Trump’s trade war, and they are being applied not just to the metals themselves but to anything made from the metals, including screws, nuts, and bolts. And foreign producers are not absorbing the tariffs; they are sharply raising prices.

This was, of course, predictable and predicted. Tariffs don’t just make foreign goods more expensive to consumers. In a world where many of the goods we import are productive inputs like screws — or auto parts — tariffs directly raise the cost of manufacturing in the United States. Yet Trump’s threats against automakers suggests that he thinks he can control inflation through intimidation.

The direct effect of tariff-driven rising costs is, however, just the beginning of the ways Trumpism will be bad for business.

In the past I’ve been skeptical about claims that uncertainty is a big factor in the economy. During the Obama years vague appeals to “uncertainty” often seemed, in practice, to be invoked as a fancy way of saying “policies I don’t like,” and was used as an excuse for ignoring that fiscal austerity forced by congressional Republicans held the economy back. But in the 10 weeks since Trump was inaugurated, perceived uncertainty has soared. Here’s one widely cited index:

It’s not hard to see why. Trump’s apparent turn to price controls is just one more indication that there are no longer any rules, that economic policy changes from day to day with Trump’s moods. I’m finishing this post up just two days before the big tariff announcement, and all indications are that the administration still hasn’t decided on the general structure of the tariffs, let alone their size. Nor will we be able to take the issue as settled after the big announcement: Trump may impose further tariffs, or slash them as suddenly as he raised them, depending on who spoke to him last. L’Etat, c’est Trump.

This kind of uncertainty is paralyzing for businesses, who are realizing that any kind of long-term commitment can turn out to have been a disastrous mistake. Build a plant that depends on imported parts, and Trump may cut you off at the knees with new tariffs. Build a plant that’s only profitable if tariffs stay in place, and Trump may cut you off at the knees by backing down.

Again, the point is that there really isn’t a MAGA economic philosophy, just whatever suits Trump’s fragile ego.

All of this was predictable and predicted. Before the election many economists warned that Trump’s policies would be destructive, although the models didn’t really take the sheer craziness into account.

The remarkable thing is how many supposedly hard-headed businesspeople didn’t see the obvious. Small business owners, in particular, clearly favored Trump, and as the chart above shows, their optimism soared when he won. Now it’s crashing.

So business owners allowed themselves to be deluded, as usual, but with even less excuse than normal. What they should have realized is that Trump’s lack of concern for ordinary Americans’ lives doesn’t mean that he’s pro-business, and that the election wasn’t about left versus right — it was about rule of law versus autocracy. Now we’re getting a first taste of what life under autocracy is like, and it’s bad for everyone, including businesspeople.

Paul Krugman is a Nobel Prize-winning economist and former professor at MIT and Princeton who now teaches at the City University of New York's Graduate Center. From 2000 to 2024, he wrote a column for The New York Times. Please consider subscribing to his Substack, where he now posts almost every day.

Reprinted with permission from Paul Krugman.

Worthwhile Canadian Observations, Or Resistance North Of The Border

Worthwhile Canadian Observations, Or Resistance North Of The Border

For those puzzled by my headline: Back in 1986 The New Republicchallenged its readers to come up with a headline more boring than “Worthwhile Canadian Initiative,” the title of a New York Times op-ed by Flora Lewis. They couldn’t. Canada, you see, was considered inherently boring.

As I wrote a couple of months ago, economists have never considered Canada boring: It has often been a laboratory for distinctive policies. But now it’s definitely not boring: Canada, which will hold a snap election next month, seems poised to deliver a huge setback to Donald Trump’s foreign ambitions, one that may inspire much of the world — including many people in the United States — to stand up to the MAGA power grab.

So this seems like a good time to look north and see what we can learn. Here are three observations inspired by Canada that seem highly relevant to the United States.

Other countries are real

I don’t know what set Trump off on Canada, what made him think that it would be a good idea to start talking about annexation. Presumably, though, he expected Canadians to act like, say, university presidents, and immediately submit to his threats.

What he actually did was to rally Canadians against MAGA. Just two months ago Canada’s governing Liberals seemed set for a historic collapse, with Conservative leader Pierre Poilievre the all-but-inevitable next prime minister. Now, if the polls are to be believed, Poilievre — who has been trying to escape his image as a Canadian Trump, but apparently not successfully — is effectively out of the running:

I won’t count my poutine until it’s served, but it does seem as if Trump’s bullying has not only failed but backfired spectacularly. (And, arguably, saved Canada; all indications are that Poilievre is a real piece of work.) But why?

Much of this is on Trump, who always expects others to grovel on command. But it also reflects a general limitation of the American imagination: we tend to have a hard time accepting that other countries are real, that they have their own histories and feel strong national pride. Canada, in particular, arguably defined itself as a nation in the 19th century by its determination not to be absorbed by the United States.

In fact, there are almost eerie parallels between some of those old confrontations and current events. The 1890 McKinley tariff, of which Trump speaks with such admiration, was in part intended to pressure Canada into joining the U.S.. Instead, it inspired a backlash: Canada imposed high reciprocal tariffs, sought to strengthen economic linkages between its own provinces, and built a closer economic relationship with Britain.Sure enough, Mark Carney, the current and probably continuing Canadian prime minister, has emphasized removing remaining obstacles to interprovincial trade and seems to be seeking closer ties to Europe.

Trump may expect submission; he’s actually getting “elbows up.”

Time and chance happeneth to us all

Why, but for the grace of Donald Trump, was the Liberal Party headed for electoral catastrophe? There were specific policy issues like the nation’s carbon tax and Justin Trudeau’s personal unpopularity, but surely the main reason was a continuation of the factors that made 2024 a graveyard for incumbents everywhere, especially continuing voter anger about the inflation surge of 2021-22.

Some of us tried to point out that the very universality of the inflation surge meant that it couldn’t be attributed to the policies of any one country’s government. If Bidenomics was responsible for U.S. inflation, why did Europe experience almost the same cumulative rise in prices that we did? But there was never much chance of that argument getting traction in the United States, where we have a hard time realizing that other countries exist.

The Canadians, however, definitely know that we exist, and you might think that public anger over inflation would have been assuaged by the recognition that Canada’s inflation very closely tracked inflation south of the border:

But no, Canadian voters were prepared to punish the incumbent party anyway for just happening to hold power in a difficult time. The race is not to the swift, nor the battle to the strong, neither yet electoral victory to parties with good policies; but time and chance happeneth to them all.

Life is about more than GDP

Canada’s inflation experience looks a lot like ours, but in other ways Canada has clearly underperformed. In particular, it has had weak productivity growth, which has left it substantially poorer than the U.S.. Canada, The Economist declared in a much-quoted article, is now poorer than Alabama, as measured by GDP per capita.

That’s not quite what my numbers say, but close. Yet Canada doesn’t look like Alabama; it doesn’t feel like Alabama; and by any measure other than GDP it isn’t anything like Alabama. Here’s GDP per capita along with a widely used measure of life satisfaction, the same one often cited when pointing out how happy the Nordic countries seem to be, and life expectancy at birth:

So yes, Canada’s GDP per capita is comparable to that of very poor U.S. states. So is per capita GDP in Finland, generally considered the world’s happiest nation. But Canadians appear, on average, to be more satisfied with their lives than we are, although not at Nordic levels. We don’t have a comparable number for Alabama, but surveys consistently show it as one of our least happy states.

Part of the explanation for this discrepancy, no doubt, is that so much of U.S. national income accrues to a small number of wealthy people; inequality in Canada is much lower.

And I don’t know about you, but I believe that one important contributor to the quality of life is not being dead, something Canadians are pretty good at; on average, they live more than a decade longer than residents of Alabama.

The general point here is that while GDP is a very useful measure, and is generally correlated with the quality of life, it’s not the only thing that matters. And the more specific point is that Canada, which among other things has universal health care, has some good reasons beyond national pride not to become the 51st state.

So Canada isn’t boring now, and it never was. As I said, try looking north; you might learn something.

Paul Krugman is a Nobel Prize-winning economist and former professor at MIT and Princeton who now teaches at the City University of New York's Graduate Center. From 2000 to 2024, he wrote a column for The New York Times. Please consider subscribing to his Substack, where he now posts almost every day.




Reprinted with permission from Paul Krugman.

Treasury Chief Scott Bessent And The Stages Of Trumpist Economic Grief

Treasury Chief Scott Bessent And The Stages Of Trumpist Economic Grief

While much of MAGA is motivated by hatred of an open society — by racism, misogyny and the desire to end all things woke — the swing voters who put Donald Trump over the top thought they were supporting a great manager who would fix the economy, reducing grocery prices and restoring good jobs. It was inevitable that they would eventually feel buyers’ remorse, because Trump never had plans to deliver on his economic promises; on the contrary, almost everything he’s trying to do will make the economy worse.

Even so, it’s stunning just how quickly consumer confidence has fallen off a cliff:

Data via University of MIchiganwww.nationalmemo.com


What’s truly remarkable from my perspective, however, is that Trump’s economic team seems to be even more despairing than the general public.

Bear in mind that “hard” economic data ­— things like unemployment, job growth, and consumer prices — are still looking fairly benign. So you might expect Trump officials to be going on television and assuring everyone that public concerns about tariffs, DOGE layoffs and all that are overblown, that prosperity like you’ve never seen is just around the corner. Instead they’re talking about pain and why Americans should accept it.

I find myself thinking about changing rhetoric about the economy as the stages of Trumpist economic grief. So far they look like this:

1. Prices will come down right away

2. Actually, reducing prices is hard and will take a while

3. Sorry, but we need a painful economic detox

4. Hey, there’s more to life than consumer goods

5. ????

As everyone knows, during the campaign Trump repeatedly promised to bring grocery prices down on Day One of his presidency. As soon as the election was over, however, he declared that “it’s hard to bring things down once they’re up.” He didn’t quite say “Nyah, nyah, fooled you!” but he might as well have. And this reversal was completely predictable.

What has happened since then has been much more surprising. I would have expected Trump officials to wait a while, to start offering excuses for a bad economy only after the economy actually, you know, turned bad. But no, they’re already telling us to expect hard times as the economy goes through a “detox period.”

Detox from what? The semi-official line is that job growth under Biden was somehow fake, that it was all low-value government employment, and that it will be painful as we move workers back to productive work in the private sector. And some in the news media are actually buying that line. The Washington Post just ran a story with the utterly credulous headline “Trump has a plan to remake the economy. But he’s not explaining it very well.”

So, first of all, why does the economy need remaking? The claim that job growth under Biden was mainly government employment is completely false:

Source: Bureau of Labor Statistics

I don’t know whether people like Scott Bessent, the Treasury secretary, are deliberately lying, although they probably are — these aren’t hard numbers to check. One thing I’ve noticed, however, is that Republican descriptions of Democratic governance often reflect right-wing fantasies about what liberals would do rather than reality. Big cities must be crime-ridden hellscapes even though New York is one of the safest places in America; Biden must have presided over massive growth in government jobs, even though he didn’t.

The other problem with the headline is, “what plan?” DOGE has wreaked havoc on federal operations, but its claims to have saved large amounts of money appear to be vaporware. And in any case, most government employees work for state and local governments, not the federal government. So how, exactly, is the economy being “remade”?

I don’t know about you, but I don’t think Trump’s problem is that he’s doing a poor job of explaining his plan. I think his problem is that he’s offering fake answers to fake problems, and the public — unlike, apparently, the Washington Post — isn’t buying it.

In any case, the real surprise is that Trump officials are making excuses for a bad economy even though the economy isn’t actually bad — yet. Maybe they believe that their boss’s policies will do a lot of damage, realize that they have no influence over those policies, and are trying to get ahead of the curve.

But item #4 on the stages of Trumpist economic grief is even more surprising. A few days ago Bessent declared that “Access to cheap goods is not the essence of the American dream.” When asked to explain his comment on Meet the Press he sort of doubled down: “The American dream is not contingent on cheap baubles they get from China.”

OK, he didn’t exactly go all spiritual and call on Americans to reject materialism. He seemed to be saying that the American dream is really about upward mobility and affordable housing, although it’s hard to see what aspects of Trump’s policies will help on either of those fronts. But still, the evolution from promises to reduce prices on Day One to “who cares about consumer prices?” is giving me whiplash.

And does anyone expect consumers to accept this new nonchalance about inflation? I don’t. So what’s the next stage in Trumpist economic grief?

I’d say that we’re entering uncharted territory, but really we aren’t. Trump is clearly a wannabe authoritarian ruler; the only question is how successful he’ll be at turning that dream into reality. And we know how authoritarian regimes deal with economic adversity.

First, they try to hide the bad news. Trump officials have already been talking about redefining GDP in ways they imagine (wrongly) will make Biden’s economy look worse and their economy better. It seems highly likely to me that once Trump’s policies start causing inflation and possibly recession, there will be a major push to cook the economic data.

Second, they punish the bringers of bad news. As the New York Times has reported, that’s China’s approach:

Beijing has censored and tried to intimidate renowned economists, financial analysts, investment banks and social media influencers for bearish assessments of the economy and the government’s policies. In addition, news articles about people experiencing financial struggles or the poor living standards for migrant workers are being removed.

If you say that such a crackdown couldn’t happen here, you’re being naïve. In fact, it’s already happening to some extent, largely through self-censorship by media organizations. (Hello, Jeff Bezos.) If the economy worsens, expect the pressure to stay positive to become much more intense.

And bear in mind that we’re only two months into the second Trump presidency. What will things look like a year from now?

Paul Krugman is a Nobel Prize-winning economist and former professor at MIT and Princeton who now teaches at the City University of New York's Graduate Center. From 2000 to 2024, he wrote a column for The New York Times. Please consider subscribing to his Substack, where he now posts almost every day.

Reprinted with permission from Paul Krugman.

QAnon Rules: The Paranoid Style In The Musk-Trump Regime

QAnon Rules: The Paranoid Style In The Musk-Trump Regime

It was predictable that the co-presidency of Donald Trump and Elon Musk would eventually face a backlash. After all, Trump’s entire campaign was built on fantasy promises -- like lowering grocery prices on day one of the Administration – that he had no way and no plans to honor. Moreover, the Administration’s actual policy agenda manages to be both deeply unpopular and economically destructive.

Even so, I admit that I am surprised at how quickly the backlash has developed. Republican members of Congress, rather than face angry denunciations by their constituents, have stopped holding town halls in their home districts. Tesla dealerships across the country are beset by protests, and in some cases vandalism. Fox News and the Wall Street Journal have both turned critical as the economy and the stock market rapidly deteriorate.

Notably, America’s oligarchs have been slow to wake up and smell the outrage. Until very recently most CEOs and large investors were bullish on Trump. But Trump’s dizzyingly erratic moves on tariffs may have finally delivered the message to the oligarch class that the Musk-Trump duo have no idea what they’re doing.

You can see this dawning revelation in stock prices. Let’s be clear: The stock market is not a good measure of how the economy is doing. It is, however, an indicator of the mood of people with a lot of money to invest. Now that reality has begun to set in, the market has given up all of the “Trump bump,” the stock gains that followed Trump’s election victory:

If you ask me, the public and especially big business are still behind the curve in understanding how much damage these people will inflict. Already we have a secretary of health and human services who responds to a major outbreak of measles by suggesting we take cod liver oil, and we have an agriculture secretary who suggests that the solution to high egg prices is to raise your own chickens. Plus we’ve destroyed our alliances and are rapidly undermining our scientific and technological capacity.

As the economy stumbles and the stock market tanks, consumer confidence lags, and even some Trump voters are losing faith, what I find particularly revealing is how the Trump cabal is responding. They aren’t rethinking their policies; they aren’t even making major efforts to justify their policies to an increasingly skeptical public. Instead, they’ve instantly descended into a pit of insane conspiracy theories.

Thus, according to Mike Johnson, the speaker of the House, those rowdy audiences at town halls aren’t citizens sincerely concerned about government layoffs and looming cuts to Medicaid; they’re “paid protestors” hired by “George Soros-funded groups”.

Gotta say, those Soros people are pretty impressive if they’ve managed to secretly hire fake protestors for town halls all across America.

What about those Tesla protests? According to Musk, they aren’t a response to his Nazi salutes and the chainsaw DOGE has been taking to crucial public services. In his mind they’re a conspiracy organized by five people, three of whom happen to be Jewish and two of whom happen to be dead:

And that big decline in the stock market? According to Trump, it’s not a response to concerns about his zigzagging tariff policies. “I think it is globalists that see how rich our country is going to be and they don't like it.” Yep, globalist Trump-haters have tanked a $48 trillion market.

If all of this sounds crazy, that’s because it is. What we’re hearing from the Musk-Trump Administration sounds, if I can use the term, distinctly un-American. It’s the kind of rhetoric you expect from an authoritarian regime that attributes every setback to sabotage by rootless cosmopolitan enemies of the state.

Then again, why should we be surprised? An excellent recent analysis by John Burn-Murdoch of the Financial Times, using data from the World Values Survey, shows that at this point the U.S. right’s values are in fact very similar to those of authoritarian regimes like Russia and Turkey, and not at all like those of Western democracies, or for that matter its own values a generation ago:

While rule by crazy conspiracy theorists is an unquestionably bad state of affairs, let me lay out two specific reasons it’s bad.

First, it means that the people in charge won’t learn from failure. When things go wrong — when planes crash, or forests burn, or children die of preventable diseases, or the economy enters stagflation — it won’t be because policies should be reconsidered. It will be because sinister globalists are plotting against America. And the beatings will continue until morale improves.

Second, there will be a search for scapegoats. Much of the federal government is already in the midst of a de facto political purge, with professional civil servants replaced by apparatchiks and job cuts falling most heavily on agencies perceived as liberal. These purges will intensify and broaden, increasingly extending to the private sector, as the administration proves itself incapable of governing effectively.

It’s a scary prospect. I only hope that enough people get scared and angry enough, soon enough, to save America as we knew it.

Paul Krugman is a Nobel Prize-winning economist and former professor at MIT and Princeton who now teaches at the City University of New York's Graduate Center. From 2000 to 2024, he wrote a column for The New York Times. Please consider subscribing to his Substack, where he now posts almost every day.

Reprinted with permission from Paul Krugman.