Krugman on NAFTA/USMCA, jobs, and China tariffs (with David Westin)

Introduces the topic: the auto industry as the poster child for North American trade, with NAFTA/USMCA at the center.

David Westin

Paul Krugman

Those are not really separate cities; there's just a borderline through them. Stuff goes back and forth, tremendous specialization reduces costs and increases efficiency.

Describes the integrated nature of Detroit-Windsor as a metaphor for North American trade integration.

Asks Krugman about job losses in Michigan and Ohio, and whether Trump's proposed barriers would help.

David Westin

Paul Krugman

We have lost a lot of jobs, but it's not mostly because of NAFTA. The idea that turning our back on the world will add jobs is probably wrong.

Acknowledges job losses but disputes NAFTA as the cause; argues protectionism is unlikely to restore manufacturing employment.

Introduces China as a specter in the room, not part of USMCA negotiations.

David Westin

Paul Krugman

Interdependence can be weaponized. We need to maintain capacity in reliable allies for strategically important stuff. Conditional tariffs on Chinese cars are probably necessary. A much more interventionist position has become hard to avoid.

Explains his shift: shocked by his own change of mind and colleagues' views; Europe needs to protect its auto industry from being overrun, even if consumers benefit short-term.

Jim Jarrell

Certainty has got to be the prize award we've got to be chasing here. It is absolutely critical to have that.

Emphasizes predictability over tariff levels.

Paul Krugman

The great virtue of the post-WWII trade system was predictability. I would almost prefer Trump put on more tariffs but committed to keep them in place, than have rolling negotiations where you don't know what next year will be like.

Argues certainty is more important than tariff levels for business investment.

Asks Krugman how to win the negotiation with Canada and Mexico.

David Westin

Paul Krugman

USMCA is an easy case; there is no trade conflict except in Trump's mind. We shouldn't worry about dependence on Canadian aluminum or Mexican auto production. The problem with Mexico and Canada is a figment of the president's imagination.

Proposes going beyond free trade to a European Union-style customs union with free movement of goods and a common external frontier. Real problem is China.

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