Why Nobel economist Paul Krugman thinks Trump's trade war will make Americans 'measurably poorer'

• Paul Krugman warns that Trump's trade policies are a threat to the US economy.
• Trump's tactics are leading to strained relations with trade partners, Krugman says.
• He predicts a "divorce" between the US and major trading partners.

Paul Krugman thinks Americans will ultimately be the biggest losers of chaotic US trade policy.

The Nobel Prize-winning economist thinks Donald Trump's trade policies and aggressive negotiating tactics are spurring global instability that will eventually come back to bite the US.

And despite his recent focus on affordability, Krugman thinks that Trump's trade maneuvers will harm American consumers who are already struggling.

Other economists and market commentators have raised similar alarms. Moody's Analytics chief economist Mark Zandi has predicted that tariffs could push the US into a recession, and hedge fund billionaire Ray Dalio recently speculated that they could lead to capital wars on the global level.

In a Substack post, Krugman highlighted the problems he sees with Trump's focus on strong-arming other countries into making a deal.

"Now US economic relations with other nations have turned abusive, and the world is moving toward divorce," he said. "And this will make Americans measurably poorer."

As a result of this "divorce," US trade partners will make more deals with each other and fewer with the US.

A recent study has said that American consumers are being forced to shoulder almost the entire cost of Trump's tariffs, but now Krugman thinks they're about to be stuck with another bill as Trump continues to use tariffs as a negotiating tool.

In Krugman's view, trade data show how other nations value access to the EU more than the US.

"This measure tells us how much of other countries' output they sell to the United States," Krugman noted. "The answer, on average, is less than 5 percent, and much lower when you exclude Canada and Mexico."

The economist added that the number also doubles when computed for the EU. Put simply, when the total output of other countries is added up, twice as much is sold to the EU as to the US.

Other nations are aware of this and are seeking to distance themselves from the US in favor of remaining on good terms with the EU, he said. Krugman used the example of India's recent trade deal with the EU to highlight the trend of "economic divorce" that he sees.

"Unlike Donald Trump, who thinks of international trade as a zero-sum game, the Europeans and the Indians understand that a free trade agreement between them is a very good deal for both parties," he said.