The following is a lightly edited transcript of the July 30 episode of the
Daily Blast podcast. Listen to it here.

Greg Sargent: This is The Daily Blast from The New Republic, produced and presented by the DSR network. I’m your host, Greg Sargent.

You’ve probably heard that President Trump and the European Union have reached a big trade deal. This is being widely portrayed as a win for Trump and a big humiliation for the EU. But we think the claim that Trump won is just bizarre. First, the details of the deal themselves cast some doubt on this idea. And second, it’s not at all clear what we gain as a country from this deal, particularly in the long run. Surely the phrase “Trump won” has to mean more than “Trump gets to claim a victory and the media plays along,” right? Well, maybe not, it turns out. Economist Paul Krugman has a great new piece on his Substack casting a lot of skepticism on the deal, so we invited him on to walk us through all of it. Paul, thanks for coming on.

Paul Krugman: Thanks for having me on.

Sargent: So the basics of this deal are that the U.S. is imposing a 15 percent tariff on most imports from Europe with some exceptions. There’s some talk about the EU agreeing to buy $750 billion in American energy spread out over three years and an increase of $600 billion in investment in the United States. Paul, to start with, can you walk us through the tariff piece of the deal? What does it amount to, and what does it mean?

Krugman: Well, it means that anybody bringing European goods into the U.S. is going to pay a tax equal to 15 percent of the value. And that in itself doesn’t tell you who pays it, but there’s overwhelming evidence that the great bulk of that is going to end up being paid by U.S. consumers. Certainly, none of it is being paid by the Europeans. The way to look at it is to say, Has Europe reduced the prices of stuff it sells to the United States? And actually, the Bureau of Labor Statistics has a measure of that, and it hasn’t gone down at all. So the Europeans aren’t paying it. At the moment, probably a lot of it is being borne by U.S. businesses, which haven’t yet passed it on to consumers, but they will. And so this is a sales tax on a bunch of stuff that American consumers buy.

Sargent: Right. And no matter how you slice it, those tariffs are going to be a loser for lower-income consumers, right?

Krugman: Yeah. People with lower incomes spend a higher share of their income than people with high incomes. There’s at least some indication, although this is true more for some of the other tariffs, that the goods that are being hit hard are things that lower-income people spend more on like basic clothing. And the main thing is: This tariff is part of a package. We’re also getting big tax cuts, and the tax cuts are entirely for high-income people. And we’re getting benefit cuts for low-income people. Put the whole thing together, and this is a huge upward redistribution of income from people who really can’t afford to lose the money to people who don’t need the money. That’s the summary. And the trade policy is just fundamentally part of that. It isn’t really about trade at all.

Sargent: Right. And so can you walk us through which goods we’re talking about? There are a bunch of goods that are exempted here, but the vast majority of goods that we import from Europe will be hit by this 15 percent tax. Can you just break that down a little bit for us?

Krugman: Well, what we import from Europe is mostly manufactured goods, a few agricultural. It is true that wine will pay more, and maybe that’s somewhat an upper-income thing, though not very much. Also olive oil, which is used in a lot of things. So agricultural products, many of them … if you buy a box of better-quality pasta, it’s going to cost more. And then cars—we do import a fair number of cars from Europe, and they’re not just luxury cars. So that’s going to cost more. We import a lot of intermediate goods, like capital equipment. A lot of the machinery that’s used in U.S. production comes from Europe. And so that will cost more, and that’ll end up being a higher price.

There’s a particular quirk here, which is really quite important: Cars from Europe will now pay a 15 percent tariff. Cars from Canada—there are some complicated rules that somewhat mitigate this, but basically cars from Canada pay a 25 percent tariff. The thing about a car from Canada is a lot of the content of the car and a lot of the parts out of which the car are made are made in America. So basically products that involve a lot of U.S. jobs are now paying a higher tariff rate than cars from Europe, which don’t. So we’re actually tilting the playing field against U.S. manufacturing. And on top of that, we have 50 percent tariffs on aluminum and steel. So if you think about making a car in Michigan versus making a car in Germany, it’s gotten substantially more attractive to make it in Germany as a result of this whole deal.

Sargent: It’s hard to see how that’s a loss for Europe and a gain for us, is........

© New Republic