A Nobel Prize-winning economist is warning that President-elect Donald Trump's threat to impose tariffs on different countries could quickly backfire if his counterparts decide to up the ante.
In a series of posts in newly-created social media platform Bluesky, Paul Krugman claimed that "one possibility regarding Trump tariffs" that he believes has not been given enough consideration is "that other leaders may decide he's weak and easily bamboozled -- and may be right."
To illustrate his point, Krugman pointed at the recent engagement between Trump and Mexican President Claudia Sheinbaum, who seemed to stand her ground and impose retaliatory tariffs after her counterpart's threat of imposing a 25% one on all goods coming from the country unless Mexico agreed to his demands.
"Then she had a conversation with Trump, after which he claimed to have won big concessions, but she said she promised nothing. Her version seems a lot more credible," Krugman said of the most recent conversation between the two.
Concretely, Trump took to his own social media app, Truth Social, in order to say that Sheinbaum had agreed to "stop Migration through Mexico, and into the United States, effectively closing our Southern Border." "Mexico will stop people from going to our Southern Border, effective immediately," he added in a follow-up post.
Sheinbaum, however, then took to X (formerly Twitter) to correct Trump's account of their dialogue. "In our conversation with President Trump, I explained to him the comprehensive strategy that Mexico has followed to address the migration phenomenon, respecting human rights. Thanks to this, migrants and caravans are assisted before they reach the border," she said. "We reiterate that Mexico's position is not to close borders but to build bridges between governments and between peoples."
According to Dr. Jeremi Suri, an award-winning global affairs lecturer and author, Trump's proposed tariffs could "hit the U.S. harder than Mexico." In an interview with The Latin Times, Suri said Trump's tariffs could ultimately backfire, inflicting greater damage on the U.S. economy by disrupting supply chains in key industries, driving up prices for American consumers, reducing production efficiency, and straining international trade partnerships.
Krugman said that it is "quite likely that other trading partners will respond similarly" to Sheinbaum. "They probably realize, even if Trump doesn't, that America doesn't have a clear advantage in a potential trade war, especially if it's America against the world. And probably a good idea not even to give Trump symbolic concessions," he concluded.
The economist's assessment coincides with a recent report detailing how Canada is also exploring potential retaliatory tariffs. A Canadian government official, speaking anonymously to CBS News, confirmed that the country is exploring such an option, but stressed no final decision has been made.
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