GZERO Media

Tariffs: What Comes Next with Paul Krugman and Scott Lincicome

The GZERO World podcast examined the fallout from the Supreme Court’s February decision that President Trump lacked authority to impose tariffs under a declared national emergency. With that avenue closed, the administration invoked the obscure Section 122 of the 1974 Trade Act to impose new across‑the‑board duties, prompting a debate between Nobel laureate Paul Krugman and trade analyst Scott Lindome about the legality and practicality of this workaround. Krugman argued that the Section 122 tariffs are “as clearly illegal as the AIPA tariffs, if not more so,” noting that the statute requires a balance‑of‑payments deficit that the United States does not have. Lindome countered that the statute does grant tariff power, but the factual trigger is missing, leaving courts to decide whether the executive can act without a genuine deficit. Both agreed the legal uncertainty will likely push refund disputes to lower courts for years, while the Congressional Budget Office estimates the tariffs generate roughly 1% of GDP in revenue – about 16% of the federal deficit – a modest but politically salient sum. The conversation highlighted real‑world consequences: consumers face higher prices, and the leverage that threatened tariffs once gave the president bargaining power, yet few concrete trade agreements have materialized. Krugman cited personal anecdotes of pantry stockpiling, while Lindome referenced KO Institute polling showing Americans’ superficial nationalist sentiment collapses when faced with higher costs. Both noted that despite political rhetoric, trade volumes remain robust and globalization persists at the business level. Looking ahead, the experts warned that the tariff saga adds volatility to an already tense midterm election cycle. Lawmakers may be reluctant to relinquish tariff revenue, but the broader economic trade‑off—higher prices, reduced efficiency, and uncertain foreign‑investment commitments—could erode support for the administration’s trade agenda. The episode underscores how legal challenges to executive trade power can reshape policy, market expectations, and electoral calculations.