Eyes on the Economy A conversation with Paul Krugman
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May 12, 2025 
Avery Shenfeld sits down with Paul Krugman, a Nobel Prize-winning economist renowned for his insights in macroeconomics. They dive into the intricate U.S. budget process and its impact on social safety programs. Krugman discusses the complexities of recent trade agreements, especially with the UK, and the challenges Canada faces in its negotiations with the U.S. Additionally, they analyze how tariffs influence inflation and investment uncertainty, alongside the political dynamics shaping bond market volatility. Expect sharp commentary and thought-provoking economic trends!
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Trade War Driven by Trump
- The trade war reflects Donald Trump's personal agenda rather than broad political or economic forces.
- Tariff decisions rely heavily on presidential discretion rather than traditional legislative approval processes.
10% Tariffs as a Political-Economic Balance
- A 10% tariff rate acts as a focal point balancing political optics and economic pain.
- Costs of tariffs increase roughly with the square of the tariff rate, making higher tariffs exponentially more damaging.
Tariffs' Inflation Impact Temporary
- Expected tariffs in the US might add about two percentage points to inflation temporarily.
- The Federal Reserve may see the inflation as a one-off and not adjust interest rates aggressively.