Tariffs: What Comes Next with Paul Krugman and Scott Lincicome

Why It Matters

The court’s rebuke of Trump’s tariff authority and the subsequent legal gray area under Section 122 create fiscal uncertainty and political risk, influencing both consumer costs and the viability of future trade negotiations ahead of the midterms.

Key Takeaways

• Supreme Court blocked Trump’s emergency tariff authority under national emergency
• Administration pivoted to Section 122 of 1974 Trade Act for tariffs
• Experts argue Section 122 tariffs lack legal basis and may be illegal
• Tariff revenue adds ~1% GDP but raises consumer prices and inefficiency
• Political backlash and uncertainty hinder durable trade deals ahead of midterms

Summary

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.

Original Description

While Washington has become more hostile to globalization, Americans continue to buy foreign goods in record numbers. Lincicome notes that economic nationalism is “about an inch deep,” with support collapsing when Americans face higher prices for domestic products.

The conversation also explores the impact of tariffs on businesses and consumers. Lincicome explains that if certain tariffs are ruled illegal, companies could seek refunds totaling up to $175 billion, potentially through litigation rather than administrative action. Krugman emphasizes that while policy debates grab headlines, public perception and midterm politics may ultimately matter more than the details of trade law or corporate strategy.

From the immediate fallout of legal challenges to the broader question of how the U.S. navigates trade and globalization, Bremmer, Lincicome, and Krugman explore the delicate balance between politics, policy, and the economy—and what it could mean for American consumers, businesses, and the upcoming midterms.

Host: Ian Bremmer

Guests: Paul Krugman, Scott Lincicome

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