Wednesday, May 31, 2017

How Trump Could Break the European Union

President Trump with his failure to understand basic economics, especially trade economics, continues to make some pretty bad economic theorists look good. At least they understand the basics.

Case in point, the generally confused Keynesian economist Paul Krugman, responded correctly (and viciously) in part of a commentary on this tweet from President Trump.
Krugman wrote in a paper that appears at the City University of New York website, where he now
Trump’s tweet on German-US trade was, it goes without saying, deeply stupid and destructive. He obviously doesn’t get how the EU works – it’s a customs union, so there is no such thing as bilateral trade policy. He also thinks that bilateral trade balances are the test of fairness, which is all wrong.
It is correct as far as it goes but Krugie is not really a deep, deep thinker.

If Trump was a three-dimensional economic policy player, and if he wanted to wreak havoc amongst EU members, he could slap tariffs on individual countries within the EU and let them sit in their Brussels custom union meeting house and think about that for awhile. He doesn't have to play by their rules. It is possible by that move alone that Trump could break the EU---and Krugie would have to re-write his paper.


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