\nMeaning beyond economics: divorcing the United States<\/p>\n
Krugman says that beyond the economic benefits, something even more important is at stake: the EU\u2013India agreement marks a major step by the global economy towards an \u201ceconomic divorce\u201d from the United States. While the economic logic has been clear for a long time, concluding the deal required both sides to overcome narrow vested interests. What changed the equation, he argues, is that both Europe and India are now looking for ways to pivot away from trading with America.<\/p>\n
Europe has many reasons to be unhappy with the Trump administration, ranging from false claims that Europe has taken unfair economic advantage of the US, to threats aimed at protecting America\u2019s big tech interests, interference in European domestic politics by supporting the far right, and even talk of seizing Greenland.<\/p>\n
India, he says, has even more reason. The Trump administration imposed tariffs on Indian exports averaging as high as 34.5%\u2014roughly on a par with those applied to Chinese goods. Krugman calls this bizarre both economically and diplomatically, because previous US administrations had tried to cultivate closer ties with India as a counterweight to China, a dangerous rival. But everything changed, he argues, when the US leader became erratic.<\/p>\n
\nForeign companies are pulling back too<\/p>\n
Krugman notes that it is not only governments that are steering away from the US; foreign private firms are starting to do the same. He points to three headline stories reported by Reuters and Bloomberg: (1) Volkswagen halted plans to build an Audi plant in the US because Trump\u2019s tariffs were hurting profitability; (2) German investment in China rose to a four-year high, boosted by the US trade war; and (3) the US was losing top tech talent to India as Trump\u2019s new H-1B visa rules disrupted the market.<\/p>\n
\nUS threats are no longer effective<\/p>\n
As Krugman wrote his article, he said Trump had not yet responded to the EU\u2013India agreement\u2014perhaps because officials in his administration were preoccupied with the \u201cPretty\u201d murder case. But he predicted that it would not be long before Trump posted angry tweets, similar to how he reacted to a Canada\u2013China trade deal. In general, Krugman says we should expect Trump to threaten tariffs against any country that tries to reduce reliance on the US, driven by policy made through bursts of anger online.<\/p>\n
However, he argues that America\u2019s economic intimidation will not work any more, because Trump does not hold the stronger hand. Access to the US market is not as crucial to other countries as Trump believes.<\/p>\n
\nThe world no longer needs the US in the same way<\/p>\n
Krugman cites a key figure: the share of other countries\u2019 GDP accounted for by exports to the US. On average, it is under 5%, and far lower still if Canada and Mexico are excluded.<\/p>\n
As the graph shows, when the same measure is calculated for the European Union, the figure is almost twice as high. In other words, the world \u201cneeds access\u201d to the EU market more than it needs access to the US market.<\/p>\n
\nA new era for the global trading system<\/p>\n
\u201cThe global trading system as we knew it lasted for three generations after the Second World War. It was a rules-based system in which every country saw the United States as a reliable, trustworthy partner. But now America\u2019s economic relationship with other countries has become coercive and exploitative, and the world is moving towards a \u2018clean break\u2019\u2014one that will make Americans noticeably poorer,\u201d Krugman warned.<\/p>\n","protected":false},"excerpt":{"rendered":" Meaning beyond economics: divorcing the United States Krugman says that beyond the economic benefits, something even more…\n","protected":false},"author":2,"featured_media":277101,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[2476,72,969,113,5148,61,2568,60,95417,115],"class_list":["post-277100","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-breaking-news","tag-business","tag-donald-trump","tag-economy","tag-european-union","tag-ie","tag-india","tag-ireland","tag-paul-krugman","tag-united-states"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/277100","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=277100"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/277100\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/277101"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=277100"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=277100"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=277100"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}