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Speaker 1: Bloomberg Audio Studios, podcasts, radio News.

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Speaker 2: We've been discussing, of course, that the Supreme Court's ruling

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Speaker 2: against those IEPA tariffs has thrown into question what is

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Speaker 2: going that is going to mean for some of the

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Speaker 2: tariff revenue that the Supreme Court or that the US

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Speaker 2: government has already collected. As you can see there, IEPA

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Speaker 2: really accounts for the majority of the trade remedy revenue

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Speaker 2: that the US is raking in that's estimated to be

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Speaker 2: at about two hundred and sixty billion dollars. So let's

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Speaker 2: discuss with Nobel Laureate in Economics, Paul Krugman. He is

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Speaker 2: research professor of economics at the City University of New

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Speaker 2: York's Graduate Center. Paul, it's great to have you with us.

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Speaker 2: So let's talk about that because, as we know, when

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Speaker 2: it comes to the tariff revenue, that was an important

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Speaker 2: pillar of the economic agenda of this administration. If you

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Speaker 2: take out the lion's share of that revenue in the

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Speaker 2: form of these IEPA tariffs, where does that leave that agenda?

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Speaker 3: Well, I don't actually think the revenue was a key

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Speaker 3: part of the agenda. I think it was part of

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Speaker 3: the case that the Trump administration made for the terrorists,

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Speaker 3: But I don't think it was really their motivation that said, okay,

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Speaker 3: we're looking I believe now at losing revenue that's around

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Speaker 3: zero pointy six percent of GDP, which is something like

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Speaker 3: a tenth of the budget deficit. So the budget deficit

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Speaker 3: gets about ten percent bigger as a result of this ruling.

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Speaker 3: Unless you know, in many ways, the other stuff that

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Speaker 3: that Trump was saying he's going to do is not,

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Speaker 3: from his point of view, a good substitute for a EEPA,

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Speaker 3: but it could replace a good part of the revenue.

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Speaker 3: I actually think that's all really pretty secondary. But that's

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Speaker 3: you know, in some ways, the revenue is the least

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Speaker 3: of the issues.

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Speaker 2: Well, in your view, then what is the big issue here?

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Speaker 2: I mean, obviously there's a myriad that we could name,

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Speaker 2: but what comes to mind to you is most urgent.

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Speaker 3: Well, the reason that Trump went with AEPA when he

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Speaker 3: was warned that it might not hold up in court, Right,

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Speaker 3: there was a big risk everybody understood of this of

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Speaker 3: what just happened happening, and the reason he went with

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Speaker 3: that as opposed to other more conventional trade you know, tariffs,

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Speaker 3: you know, aside from the fact that he needed something

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Speaker 3: that didn't have to pass Congress because Congress wouldn't have

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Speaker 3: approved his tariffs. But the point about, you know, what

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Speaker 3: does AIPA say about the conditions under which you can

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Speaker 3: impose tariffs? And the answer is it says nothing. The

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Speaker 3: legislation doesn't even mention terrifs. And because it was so

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Speaker 3: not really about tariffs, Trump took it as a license

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Speaker 3: to impose tariffs whenever he felt like it. He used

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Speaker 3: it as a license to impose tariffs on Brazil because

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Speaker 3: they convicted Ja Bolsonaro. He took it as a license

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Speaker 3: to threaten Europe with tariffs because they sent troops to Greenland,

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Speaker 3: and the other things that are out there which might

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Speaker 3: be able to replace the revenue will not give him

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Speaker 3: the same amount of discretion. And of course that also

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Speaker 3: implies trade deals. All of the trade deals that were

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Speaker 3: made on the basis of we will scale back the

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Speaker 3: IEPA tariffs that we imposed on you if you give

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Speaker 3: us the following things are now an all on void

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Speaker 3: because those he doesn't have that discretion anymore.

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Speaker 1: I am curious of Paul, though I don't know if

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Speaker 1: you had a chance to actually see the press conference

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Speaker 1: that Trump had a couple hours ago in response to

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Speaker 1: the ruling, and just not so much what he said,

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Speaker 1: but also some of the emotion behind it. But after

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Speaker 1: he spoke, we saw several administration officials on various social

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Speaker 1: media platforms talk about the alternatives in their view that

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Speaker 1: they could use to not only keep these tariffs in

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Speaker 1: place in some forum or another, but to actually maybe

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Speaker 1: increase them as a way for the President to get

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Speaker 1: the leverage that, in his view, he needs to get

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Speaker 1: the things he wants done.

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Speaker 3: Yeah, well, look at what he just said with the

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Speaker 3: Section one twenty two tariffs, which is boy, I didn't

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Speaker 3: that's a very you know, I never thought anybody would

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Speaker 3: invoke that. It's really kind of a of a Bretton

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Speaker 3: Woods era thinking it's actually post by way. But it's

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Speaker 3: a flat ten percent tariff on everything. That's very, very

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Speaker 3: different from saying I'm doing fifty percent on Brazil because

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Speaker 3: I don't like what they're doing domestically. It's very different

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Speaker 3: from saying I'm going to go after France, Germany in

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Speaker 3: the UK because I don't like what they're doing in Greenland.

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Speaker 3: So although it may be able to replace the revenue,

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Speaker 3: he may be able to collect enough money from these

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Speaker 3: other teriffs that the revenue hole is filled, although I

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Speaker 3: don't think that exonerates him from having to refund the

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Speaker 3: money already collected. But he may be able to replace

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Speaker 3: the revenue, but he doesn't regain the flexibility.

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Speaker 1: And that's really for me a pedantic But was it?

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Speaker 1: But does this really plug a revenue hole? Or am

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Speaker 1: I missing something we saw?

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Speaker 3: Well? I mean it's some revenue. It's a tax, I

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Speaker 3: mean a taxing. Trump terriff is general.

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Speaker 1: I don't know how many tariffs I've paid. If I

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Speaker 1: order something overseas, I get a message from FedEx or

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Speaker 1: DHL or something else. I mean, that's not coming out

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Speaker 1: of the pockets of old people overseas.

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Speaker 3: Well, No, it's not. It's no, this is a this

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Speaker 3: is a say, sales tax, mean tariff is in the end,

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Speaker 3: the sales tax. It's it's there's a lot of uh,

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Speaker 3: you know, moving parts in the way that works out,

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Speaker 3: but it's in the end. And so this was a

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Speaker 3: The Trump teriffs are about in total, the tariff increases

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Speaker 3: around zero point nine percent of GDP.

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Speaker 1: Okay, that's but that's coming out the pockets of the

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Speaker 1: American people. Does not not potentially have a drag on

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Speaker 1: economic activity, even if it does benefit the actual government

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Speaker 1: offers itself. I mean, I am the government to a

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Speaker 1: certain extent. You are, we all are.

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Speaker 3: Yeah, no, that's right. It's it's a little bit and

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Speaker 3: if you do actually kind of work it through. But

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Speaker 3: the I because it's a tax tyke. The tariffs are

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Speaker 3: slightly contractionary, maybe more than slightly.

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Speaker 2: It's it.

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Speaker 3: Yeah, that's one of those things where you have to

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Speaker 3: ask what else is going on? But what you know,

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Speaker 3: how does this affect the FED? I mean, if the

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Speaker 3: tariffs weren't there, the FED would probably have lowered rates

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Speaker 3: already and so on. But it's it's a certainly it

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Speaker 3: is a significant increase in the cost of living, not

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Speaker 3: a gigantic increase the cost of living. But everybody's cost

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Speaker 3: of living is somewhat higher because of these tariffs. And

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Speaker 3: you know that will go away, but these other tariffs

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Speaker 3: will also be attacks on the American people.

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Speaker 2: And yeah, well, Paul, we only have about a minute left.

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Speaker 2: But you said that will go away in reference to

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Speaker 2: the cost of living. And I want to ask you

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Speaker 2: about your confidence there, because when a company, you know,

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Speaker 2: raises prices, they tend to be sticky. Do you have

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Speaker 2: confidence that you know some of the corporations that have

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Speaker 2: raised prices in response to tariffs actually will lower them.

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Speaker 3: Well, that's always a question. But you know, we have

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Speaker 3: ongoing inflation running at about three percent a year, so

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Speaker 3: all that has to happen is for companies not to

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Speaker 3: raise prices as much as they would have. So all

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Speaker 3: of this plays out a little bit over the course

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Speaker 3: of let's say a year, So I don't have much

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Speaker 3: doubt that we will infect But of course, if this

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Speaker 3: is a net reduction of terrorists, because you know, Trump

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Speaker 3: is basically proposing a new set of terroriffts to make

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Speaker 3: up for the loss of the old ones. So because

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Speaker 3: consumer relief may be very short lived.

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Speaker 1: Here, all right, Paul, always appreciate it, appreciate your insights.

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Speaker 1: Paul Krugman over at gunes's Graduate Center and of course,

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Speaker 1: Nobel Laureate in Economics,