Krugman Considers Tariffs on Chinese Cars

Nobel Prize-winning economist Paul Krugman recently implied during an interview that implementing certain tariffs on cars manufactured in China might be necessary. He discussed this topic in a speech on Saturday, suggesting that “conditional tariffs” could be a viable approach to protect European auto industries.

Krugman expressed concern that allowing the automotive sector in Europe to be completely undermined would be unacceptable. “I don’t think European countries can afford to let their auto industry be hollowed out,” he remarked, highlighting the pressing issues at stake.

However, Krugman also stated that fully excluding Chinese cars from markets could lead to negative outcomes, both economically and for consumers. He admitted to being surprised by not just his own change in perspective but also by similar shifts among colleagues who had long championed free trade and globalization.

He pointed out, “If you really want to think about national security, it’s a problem if a major industry like the European auto sector is overwhelmed. Consumers might gain in the short term, but it’s not the same scenario we faced two decades ago.”

Krugman stressed that advocating for tariffs doesn’t mean he supports applying them to every product. His current view leans toward a more interventionist stance, which, as he noted, is becoming harder to ignore.

Previously, Krugman had criticized the tariff strategy under the Trump administration, calling it a “complete and utter mess.” His views on trade deficits and tariffs have evolved over time, moving towards a more cautious approach in today’s economic climate.

In November 2025, a trade agreement between the U.S. and China, partially concerning restrictions on certain imports, was announced, aiming to address issues like the flow of fentanyl. The White House indicated plans to lower tariffs on goods by 10 percentage points starting that same month.

Against this backdrop, it’s important to note that Chinese automakers have recently outperformed their U.S., European, and Japanese counterparts in various areas like electric vehicles and battery innovation, suggesting a shift in the global automotive landscape.