Tariffs: what comes next with Paul Krugman and Scott Lincicome

Summary

GZERO World with Ian Bremmer

Episode: Tariffs: what comes next with Paul Krugman and Scott Lincicome
Date: March 7, 2026

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Episode Overview

This episode of GZERO World with Ian Bremmer features an in-depth discussion on the recent U.S. Supreme Court decision curbing presidential power over tariffs—a core part of President Trump’s economic agenda—and the subsequent maneuvering by the administration to reinstate tariffs via a different statute. Economist Paul Krugman and Cato Institute trade expert Scott Lincicome break down the legal, political, and economic ramifications of the new landscape in U.S. trade policy, its impact on midterm elections, and what it signals about American power, globalization, and checks and balances.

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Key Discussion Points & Insights

1. Supreme Court Decision and Its Implications

Timestamps: [00:02]–[03:17]

• Supreme Court Strikes Down IEEPA Tariffs

  • The Court ruled 6-3 that President Trump lacked authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA), even with national emergency claims.
  • Notably, two Trump-appointed justices sided against the administration—a strong check on executive power.

• Switch to Section 122 Tariffs

  • Within hours, the administration invoked Section 122 of the 1974 Trade Act to impose fresh tariffs (10% and 15%).
  • Paul Krugman: Critically observes Section 122’s obscure language and doubts its legal standing:

    "Section 122...is extremely—so far as the language can be interpreted at all, it's not even clear what it means. It says balance of payments deficit. Nobody in these days knows what that means, but it's very clear... it's not one we have." ([03:42])

• Legal Uncertainty Over Section 122

  • Scott Lincicome: Notes Section 122 does grant tariff authority but the conditions (i.e., a balance of payments crisis) are questionable:

    "The question becomes, do the conditions for which that are needed...do they exist? Courts tend to be deferential to administrative expertise..." ([04:15])

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2. The Utility and Fragility of Tariff Threats

Timestamps: [06:04]–[07:28]

• Did the Threat of Tariffs Foster Trade Deals?

  • U.S. negotiators used the broad threat of IEEPA tariffs as leverage in fast-tracked, minimally detailed trade negotiations.
  • Lincicome:

    "They got you a press conference and a website that lists some details, but whether that actually translates to tangible investments and new market access is still a really big open question." ([06:38])

• European Response

  • Europe struggled to deliver promises of bigger U.S. investments, embarrassed itself chasing concessions for tariffs the President wasn’t legally able to impose.
  • Krugman:

    "The Europeans are, to use the technical term, pissed. I mean, they kind of humiliated themselves to get some concessions... that it turns out Trump didn’t have the authority to impose in the first place." ([07:28])

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3. U.S. Globalization and Changing Political Attitudes

Timestamps: [09:02]–[11:54]

• Political Class vs. Public Sentiment

  • Washington politicians from both parties have soured on free trade, but actual American import/export behaviors suggest ongoing globalization.
  • Lincicome:

    "Globalization is going on in practice. Although I think the political rhetoric is... extremely anti-globalization." ([09:37])

• Tariffs Are Unpopular with the Public

  • Krugman:

    "...the tariffs are wildly unpopular. I've never seen anything really a major policy issue where the policies being currently pursued are as unpopular..." ([10:27])

  • Americans claim to support “Buy American,” but that evaporates when personal costs rise.
  • Lincicome:

    "...the American people’s nationalism is about an inch deep...if they're willing to pay $10 more...support collapses." ([11:22])

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4. Economic Impacts and Congressional Incentives

Timestamps: [11:54]–[14:11]

• Tariffs as Government Revenue

  • Tariffs generate about 1% of GDP—non-trivial, but not massively transformative for the federal budget.
  • Krugman:

    "...the whole Trump tariff thing was adding around 1% of GDP in revenue...less than the proposed increase in spending at the Pentagon." ([12:16])

• Bad Tax Policy?

  • Lincicome raises the trade-off: some revenue gained, but harms overall productivity, growth, and economic efficiency.
  • Lincicome:

    "...if you're doing so at the expense of not just higher prices, but less productivity and economic efficiency...it's not really a great trade off." ([13:15])

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5. Political Strategy for Trump and Electoral Implications

Timestamps: [14:38]–[17:25]

• Advice for Trump's Economic Messaging
  • Lincicome suggests focusing on affordability and supply-side reforms, but acknowledges entrenched public perceptions and limited short-term impacts.

    "I don't know if there's that much they can really do." ([14:59])

  • Krugman: True benefit of any policy change would not be felt quickly; most people don’t focus on policy intricacies:

    "...the most important thing Trump could do right now would be basically not to be Trump...not go around boasting about how great it is..." ([15:43])

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6. Refunds, Litigation, and Corporate Incentives

Timestamps: [17:25]–[20:31]

• Huge Potential Refunds at Stake

  • Businesses stand to recover up to $175 billion in illegal tariffs.
  • Lincicome:

    "...I think they [CEOs] will go after that money, but do so via the litigation that's likely going to be necessary." ([18:05])

• Unlikely for Consumers to Benefit

  • Direct refunds unlikely for individual consumers—system is set up to refund those who paid the tariffs (importers), not necessarily those who bore the final cost.
  • Krugman:

    "Will any of that go to you and me? Will any of that show up at the store? And the answer, as far as we can tell, is no." ([19:08])

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7. Judiciary as a Check on Executive Power

Timestamps: [20:31]–[22:30]

• Restoring Balance: Supreme Court as a Check
  • The Court’s decision, with compliance by Trump’s administration, demonstrates functioning limits on the presidency.
  • Krugman:

    "...for all that talk about Trump being uncontainable...he isn't actually apparently able to simply give flat out illegal instructions... we are seeing an object lesson in the limits of presidential power." ([21:08])

  • Lincicome:

    "...the ability of the little guy to stand up to President Trump and to the US government is also pretty great news for the Republic." ([22:02])

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Notable Quotes

• "Pissed Europeans is kind of a new thing on the world stage and they’re kind of trying to...throw their weight around a bit more."
  — Paul Krugman ([07:28])
• "The American people’s nationalism is about an inch deep."
  — Scott Lincicome ([11:22])
• "The most important thing Trump could do right now would be basically not to be Trump."
  — Paul Krugman ([15:43])
• "The ability of the little guy to stand up to President Trump and to the US government is also pretty great news for the Republic."
  — Scott Lincicome ([22:02])

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Key Segment Timestamps

• [02:39] — Initial reactions to the Supreme Court ruling
• [03:42] — Legality of Section 122 tariffs
• [06:04] — Tariffs as negotiation leverage; reality vs. perception of new trade deals
• [09:37] — U.S. political attitudes toward globalization and trade
• [12:16] — Fiscal impact of tariffs
• [14:59] — Midterm election economic strategy
• [18:05] — Corporate response to tariff refunds; scale of potential refunds
• [21:08] — Supreme Court as a check on the presidency

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Conclusion

The episode provides a robust analysis of the evolving legal and political framework shaping U.S. trade policy, the interplay of executive and judicial power, the real-world effectiveness of tariffs as a tool, and the contrasting narratives on globalization among American leaders and the public. Krugman and Lincicome offer clear-eyed, often humorous reflections, highlighting both the technical complexities and the human, economic, and political realities at play.

Transcript

[A]

Hello and welcome to the Gzero World podcast. This is where you can find extended versions of my conversations from public television. I'm Ian Bremmer. And in late February, the Supreme Court struck down the core of President Trump's economic agenda. The court ruled that Trump lacked the authority to impose tariffs simply by declaring a national emergency. The 6:3 majority ruling included conservative justices, two of whom Trump appointed himself at a moment when many Americans have questioned whether the courts would constrain executive power. This was a rebuke. Within hours of the decision, the administration invoked a different statute, Section 122 of the 1974 Trade act, to impose a new across the board tariff. And in his State of the Union address, the President made clear he had no intention of backing away from tariffs as a central pillar of US Economic policy. And as time goes by, I believe

[B]

the tariffs paid for by foreign countries

[A]

will, like in the past, substantially replace the modern day system of income tax, taking a great financial burden off the people that I love. So what has actually changed? Is this a real check on presidential power? Well, companies get refunds for tariffs the court says were illegally collected. And what does all of this mean for the US Economy heading into midterm elections? Joining me to discuss our Scott Lincecomb of the Cato Institute and Nobel Prize winning economist Paul Krugman. Let's get to it.

[C]

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[A]

Paul Grubman Scott Linscombe, thanks so much for joining us on Gzero World.

[D]

Thanks for having us on.

[B]

Yeah, thank you.

[A]

Plenty to talk about here. Of course. The big news is how do we think about US Trade policy on the back of the Supreme Court ruling? I take it that this outcome certainly wasn't a surprise the markets. I assume it wasn't a surprise for either of you. Scott, you want to start with that?

[B]

Yeah, I think that's right. It really was. Fortunately, my base case, that the Supreme Court would issue a pretty clean ruling on the statutory language and then punt the issue of refunds back to the lower courts.

[D]

Basically what happened, Paul, I was the fact that the court took so long to rule made me start to wobble, but that the legal case was as open and shut as I've ever seen. Now, these were clearly not legal tariffs and I didn't think that even a strongly sympathetic court would be willing to rule on Trump's behalf in this case, and they weren't.

[A]

Now, when we push this forward to the announcement of 10% and then 15% using section 122, I mean, again, I know it's only 150 days, so, I mean, in principle, you won't even have court rulings in time for that to matter. For that period, though, you could have the refund issue again. But are we facing the same kinds of questions on these, Paul?

[D]

Oh, yeah. I mean, section 122, which is very obscure, is extremely. So far as the language can be interpreted at all, it's not even clear what it means. It says balance of payments deficit. Nobody in these days knows what that means, but it's very clear that whatever the problem is, it's not one we have. So I would say that this one is as clearly illegal as the IPA tariffs, if not more so. But again, the question is, you know, given the pace at which we've gotten decisions, you know, this court might rule on it around 2030.

[B]

I mean, I would disagree with Paul just a little bit. There is a difference in that this statute clearly does allow for tariffs. And that's, I think, a big difference between this and the ieepa, which was really about whether the president even has any tariff authority under that emergency law under 122, we know he has this power. The question becomes, do the conditions for which that are needed for the President to utilize that power, do they exist? And so I don't know how a court is going to deal with that. Courts tend to be deferential to administrative expertise, to the Treasury Secretary. And even though I totally agree with Paul that as a factual matter, we have no balance of payments deficit or crisis at hand, I think it is a bit more of a question about how the courts are going to deal with, with that issue.

[A]

So, I mean, I've seen, if we look back on the last, I mean, you know, months post Liberation Day, and we know that Trump's advisors with trade expertise, and here I'm thinking, particularly Jameson Greer, the US Trade rep, like they understood, as you 2 do, that IEEPA was not usable by the President. There was no national emergency on a small island with penguins or Lesotho or the Brazilians or any of these. And yet what I'm now hearing from a lot of these people is, well, it ended up being quite useful, even though the Supreme Court ruled against, because that allowed you to then go ahead and use leverage to get these trade deals that have now been advanced significantly. Let's assume whether or not Trump, that was Trump's intention. Is that reality, Scott?

[B]

I think to a small extent, yes. The IPA tariff threat, given how open ended it was in terms of both the scope and magnitude of tariffs, did give the President some leverage and was one reason why governments ran to Washington to negotiate better deals than their foreign competitors. But the question, I think is how durable are these deals? How real are these deals? Because in that rush to get these deals out, there really are just not many details. It certainly hasn't been ratified by the Congress and you're already seeing governments take a bit of a step back and slow walk all of these details. And so at the end of the day, what did really all those IPA threats get? They got you a press conference and a website that lists some details, but whether that actually translates to tangible investments and new market access is still a really big open question.

[A]

Yeah, big new investments. So far we've seen some real movements on actual projects with the Japanese, but otherwise not so much. I mean, Paul, if you're the Europeans in this environment, for example, what do you do? How do you advise them to respond to this level of change and uncertainty in the basis of American tariffs?

[D]

Well, the Europeans were already in a bit of a pickle on this because Europe is not the kind of society or economy where the European Commission can tell private companies where to invest. The European promise of more investment in the United States was always sort of vaporware. It was kind of, well, we think this is going to happen and we're going to say that, that we did it, but it was clear that they, they really didn't have any instruments for making it happen. And now, of course, the Europeans are, to use the technical term, pissed. I mean, they, they kind of humiliated themselves and to, to get some concessions on tariffs that it turns out that Trump didn't have the authority to impose in the first place. So, and you know, that's, that in itself is kind of a useful from their point of view. I mean, pissed Europeans is kind of a new thing on the world stage and they're kind of trying to, to start to throw their weight around a bit more. So I don't think that there's anything coming. This whole idea, we're going to get lots of concessions from other countries. You know, it's not as if the rest of the world was imposing high tariffs on the United States. When Trump came out on Liberation Day and said we're going to do reciprocal tariffs, we've always had reciprocal tariffs. The whole process of getting to where we were before Trump was a 90 year process of negotiation that began with the Reciprocal Trade Agreement agreements Act of 1934. We've always cut tariffs in return for tariff cuts by other countries. So there really wasn't very much to deal on to start with.

[A]

So there's the fact, Scott, that Trump likes tariffs as a tool and doesn't like to be constrained by anyone in what he can do in any situation. But then you also have the fact that for decades now, increasingly, free trade and low tariffs has been more and more unpopular with the American voting public. And that's true on the left. It's true on the right as well. If you're thinking, I mean, the United States. Are we just in a very different place in terms of globalization, in terms of how American power economically is being projected?

[B]

I think yes and no. I think our political class in Washington has soured on open trade, the reciprocal trading system, the World Trade Organization, traditional free trade agreements, and the rest of the not so sure about the American people. I mean, even in a year of historically high US Tariffs, we're still importing tons of goods, really inflation adjusted records. We're still very much interested in foreign cultures and cuisines. American companies are still eagerly investing abroad, foreign companies are investing here. So, you know, globalization is going on in practice. Although I think the political rhetoric, of course, is extremely anti globalization.

[A]

Paul, would you agree with that?

[D]

Oh, yeah. It's one thing if you ask people, do you support free trade? And they may say no, but actually impose the tariffs and the tariffs are wildly unpopular. I've never seen anything really a major policy issue where the policies being currently pursued are as unpopular as they are on the case of Trump's tariffs. And yeah, we all depend on, you know, our lives depend a lot on the quality of our lives depends a lot. I mean, on imports. I mean, I've got, I've got a whole cupboard shelf full of Italian pasta because I rushed to stock up on it when there was a threat that we were going to have 100% tariffs and they were going to, that was going to disappear from the shelves. And you know, I may be a little exceptional there, but, but there's a lot of that going on and people really don't like what the terrorists actually do. So I think Scott's exactly right. It's more that the political elite is now thinking more mercantilist than it used to. But I'm not sure that that's a public sentiment.

[B]

Oh, yeah, just add one thing that we actually did some polling last year at Cato asking about actual trade offs for trade as well. And the American people's nationalism is about an inch deep. When you ask them if they want to buy an American pair of jeans, they say yes. If you ask them if they're willing to pay $10 more for that American pair of jeans, support collapses. Right. Because Americans, I think, in general don't really think deeply about these issues. It becomes more of partisan signaling and less about their actual revealed preferences.

[A]

I mean, Congress, it's hard to imagine that when you have tariffs that are essentially a tax, so American consumers are paying more, and that means that, you know, more money is coming into the American government coffers, whether it's a Democrat or a Republican. You know, one has to assume that Congress is going to be very reluctant to give up that kind of revenue.

[D]

Well, if I could just say, I mean, they, it is kind of important to do the numbers here. And so the Congressional Budget Office projections before the court struck them down, said that the whole Trump tariff thing was adding around 1% of GDP in revenue, which is, you know, about 16% of the budget deficit. It's less than the tax cuts that were in, in Trump's beautiful budget bill, and it's, you know, less than the proposed increase in spending at the Pentagon. So this is not a zero number, it's not a minor number, but it's not so much money that, you know, especially if we have a political culture in Washington which nobody actually wants to tackle the deficit, how concerned are they going to be about whether the deficit is a few percent bigger or smaller?

[A]

Maybe not. But I mean, I mean, you tell Congress you get 1% more to play with, you know, for your constituents. Seems to me that's generally a popular thing. Scott?

[B]

Well, I, you know, again, I agree with Paul that first, in the grand scheme of things, it isn't a ton of money. But the other big thing is that you, there is a mechanistic reduction in other taxes that, that come in because companies are paying the tariffs upfront. So I actually think the actual revenue hit, once we, once we get it all worked out, will be less than what kind of the CBO is kind of basic projection. But the other thing you have to ask is, is this actually good tax policy? You know, yes, having a little more money coming into the government is good if you're the government, but if you're doing so at the expense of not just higher prices, but less productivity and economic efficiency, slower growth and the rest, it's not really a great trade off.

[C]

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[A]

Now, Trump is underwater on the economy right now. This is a midterm election year. Let me start with you, Scott, and then go to Paul. If you were advising President Trump and his administration what you could do that might actually move those numbers in your direction over the coming months, what would you suggest?

[B]

Well, I mean, other than eliminating a lot of the tariffs, which we know isn't going to happen, I mean, I think they, they have to focus back on the affordability issue. I've, I've some of the stuff that they've proposed on housing deregulation, some of the supply side reforms there are fine. The, I think some of the provisions of the, their tax bill, the one big beautiful bill, act on full expensing for corporate taxes. Those also, I think they can run on a bit. But the reality is a lot of people's views on the economy are set and we don't expect, I don't think, radical shifts in the economy this year. So I don't know if there's that much they can really do.

[D]

Paul? Yeah, I mean, the midterms are not that far away. And the ability, even if they were to make radical changes in policies to significantly improve people's lives in time for the midterms is really negligible. And if you think about telling stories, well, you can tell people, here's this policy, it'll be great. People, by and large, just tune that out. Most people are not paying attention. Most people, if you ask, what do you think about tariffs, what do you think about housing policies? They would basically be blank because people have lives to live. They're not all nerds like us. You know, if I were to try and give it, God help me, if I were a political strategist, I would say the most important thing Trump could do right now would be basically not to be Trump and to actually say I understand that life is hard and there are a lot of things and we're working on it and not go around boasting about how great it is because that just doesn't match people's perceptions. But of course, that's not, that would be requiring that he be an entirely different person.

[A]

Well, he has said that it was gonna take a year, right? I mean, in the last couple weeks. And this is a guy who usually says everything's gonna get done in 24 hours or two weeks. He's like, in terms of, like, showing a lot of the benefits from the policies he's put in place. It's gonna have to be after the midterms, which I thought was interesting. So maybe he is listening to the shadow Paul Krugman, political strategist that's advising Trump.

[D]

Maybe. Although, I mean, I will be really surprised. This is not an I feel your pain president. This is just not his operating procedure. And I just don't think that empathy for struggling families just is something that he can hold to for more than five minutes on a podium.

[A]

I want to move to another related topic. The lawyers certainly seem to be able to do well in this environment. Refunds. I mean, the Supreme Court hasn't ruled specifically on this, but of course, if the IPA tariffs are illegal, that's a lot of money that companies, potentially consumers, should be able to, in principle, claw back. If we're thinking about CEOs, that surely would love that money, but on the other hand, really have been very skittish about getting into public fights with this president in particular. What do you think is likely to happen, Scott?

[B]

Yeah, I think the CEOs will go after this money because we're not talking about a few bucks here and there. Penn Wharton budget guys said this could be up to $175 billion in duties that are going to need to be refunded for certain companies. You're talking refunds into the hundreds of millions of dollars. And so I think they will go after that money, but do so via the litigation that's likely going to be necessary. You know, unfortunately, it doesn't appear that the Trump administration is going to just give back this money freely, even though administratively they. The vast majority of it with basically the push of a button. And so they're going to have to go to court, these businesses, but I think they will, because I think their shareholders will basically demand it, given the magnitude.

[A]

Paul, feel free to jump in on that, but also about the people, because, of course, a lot of just regular folks like you and me have spent money on these illegal tariffs. I mean, do we need a class action suit here?

[D]

Let me just first talk about the corporate behavior. It's one thing to refrain from criticizing Trump and show up and maybe even throw some money at his ballroom or something like that, which is a lot of corporate corporations have been doing. But this is as Scott says hundreds of millions of dollars for any individual company in cold hard cash and not filing for a refund, not joining the lawsuits, would be to give up a large amount that would go directly to the bottom line. So I think the incentives are just much more concrete for corporations to take a stand here. Now, will any of that go to you and me? Will any of that show up at the store? And the answer, as far as we can tell, is no. I mean, the trouble is that the law says that the people who paid the tax, which was illegal, get their money back. But to the extent that they may have passed that tax on in the form of higher prices, it's not clear what the legal basis for a refund is. It's all very indirect and would depend upon analysis. As Scott said, push of a button. We know the Treasury Department presumably knows who paid the tariffs at the point, but in terms of how much did you personally, as a consumer pay? That's a much more complicated question, and it would actually probably require legislation to make that money go out, and it's not going to happen.

[A]

Before we close, let me ask you the big question about the judiciary and whether or not this gives you, you a greater feeling that there is a substantial check on executive power. We've heard so much in the headlines over the last year that, you know, concerns that the US Is becoming a dictatorship and that Trump is uncontainable, unconstrainable. This seems, this is a pretty big decision. Six, three, including justices appointed by Trump, saying, sorry, we're gonna stop you if you're doing something we think is illegal. How should we think about that, Paul?

[D]

Oh, I mean, it's a pretty big deal. I mean, in a way, I was kind of waiting to see whether border officials would actually stop collecting the IPA tariffs and start collecting the new ones, which they have. And so that is saying, look, for all of that talk about Trump being uncontainable and no one will stand up to him, he isn't actually apparently able to simply give flat out illegal instructions to an operating federal agency, which is actually Customs and Border Patrol. It's the same people who are doing other stuff, but they are, among other things, collecting the tariffs. So, yeah, we are seeing an object lesson in the limits of presidential power.

[A]

And Scott, I mean, yes, Trump was critical of those justices that ruled in a way that he didn't want, but at no point did he suggest that he and his administration was not going to actually accept or respect the ruling.

[B]

Yeah, and that's good news. It's good news that the court pushed back on what is clearly a signature presidential initiative. And the good news that the president appears to be complying. And the other thing I'd say is good news is the plaintiffs in this case were all small businesses. And the ability of the little guy to stand up to President Trump and to the US Government is also pretty great news for the Republic.

[A]

Scott Lincecomb, Paul Krugman, thanks for joining us today.

[D]

Thanks for having us.

[B]

Thank you.

[A]

That's it for today's edition of the Gzero World Podcast. Do you like what you heard? Of course you do. Why not make it official? Why don't you rate and review GZero World 5 stars only 5 stars. Otherwise, don't do it on Apple, Spotify or wherever you get your podcasts. Tell your friends.

[C]

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