Below is Paul Krugman and my commentary on his the Economist’s report on America. Trump is destroying our sales to other Countries and we’re going to find out Countries can do without America.
Destroying America’s Brand
Losing the world’s trust, and a lot of money too
The Economist
Last week Mark Carney, having won the Liberal Party’s leadership election, became Canada’s Prime Minister. And it looks possible that he may hold that position for a while. Not long ago the Liberals seemed headed for an electoral wipeout, but they’ve seen an amazing surge in the polls:
Source: The Economist
The secret behind that surge is, of course, Donald Trump, who has not only imposed tariffs on Canada without any justification but keeps doubling down on his completely insane demand that Canada become the 51st state. Every time Trump or his minions repeat that demand, they strengthen Carney’s hand against Pierre Poilievre, the Bitcoin-loving, Trumpy-sounding Conservative leader.
And one of Carney’s first policy moves as PM was to order a reviewof Canada’s plan to buy a substantial number of U.S.-made F-35 fighter jets. This means that Canada is joining European nations that are similarly reconsidering their dependence on U.S. weapons.
This turn away from military dependence on the U.S. is understandable. America is no longer a reliable ally to the world’s democracies; indeed, between Trump’s turn toward Putin and his talk of annexing Canada and Greenland, we don’t look like an ally at all. Rumors that U.S. jets have a “kill switch” that would allow Trump to disable them at will are probablyfalse, but sophisticated military equipment requires a lot of technical support, so you don’t want to buy it from a country you don’t trust.
And this observation got me thinking. How much economic damage will America suffer because it has become a rogue nation? Of course, there’s much more than money at stake here. Still, becoming a nation that can’t be trusted to honor agreements or follow the rule of law has to have monetary as well as political and diplomatic consequences. How big are these monetary consequences?
Well, I’ve been exploring the available data, and U.S. exposure to foreign revulsion looks quite large.
Start with those military sales. U.S. sales of defense equipment to foreign governments have gone up a lot since Russia invaded Ukraine; much of the increase has gone either to Ukraine or to European governments supporting Ukraine, but there is also a general trend toward rearmament as we learn that the world is a more dangerous place than we realized, and pre-Trump that rearmament meant a lot of U.S. exports. In 2024 U.S. military exports were $318.7 billion; that was roughly 15 percent of total U.S. goods exports. It was also almost twice our agricultural exports.
How much will these sales shrink now that foreign governments know that we can’t be trusted? Given some time to find replacements, the likely answer is “a lot.”
Military hardware isn’t the only export likely to suffer from our new rogue nation status. Our trade deficit in goods is partly offset by a surplus in services trade, but several of our major service exports will definitely be hurt by America’s turn to the dark side.
One of these is education. Many foreigners come to America to study, attracted by the quality of our colleges and universities. In 2023, the most recent year for which data are available, they spent more than $50 billion. But if you were a foreigner considering study in the U.S. next year, wouldn’t you be worried that you might find yourself arrested and deported for expressing what the current administration considers anti-American views? I would. So we can expect a hit to higher education, which, although we rarely think of it this way, is a major U.S. export.