A second Donald Trump presidency can have disastrous consequences for the global economy, feels eminent economist and Nobel Laureate Paul Krugman, who said it could even spark trade wars.
Speaking to CNBC-TV18 in an exclusive interview, Krugman suggested that India, despite its efforts to steer clear of significant trade disputes, could become entangled in a global trade war if Trump secures a second term.
“India has managed to avoid getting into the kinds of trade fights that China has,” Krugman stated. “But if we have a global trade war, which is what will happen if Trump wins, then that’s really bad for everybody, and India will get caught up in it too.”
According to pre-election polling, Trump and Kamala Harris are locked in a near-dead heat ahead of the November 5 election.
Krugman emphasised that while India has been showcasing impressive dynamism, it still faces challenges in infrastructure and education. These vulnerabilities could strain India’s economic growth in a hostile trade environment.
Krugman highlighted that Trump’s economic policies in a potential second term would likely be far more radical than before, leading to severe inflation and disrupting global economic growth.
“Trump 2.0 (will be) very different from Trump 1.0,” Krugman said, adding that the former president is “credibly promising to do really radical stuff,” which could significantly impact emerging markets like India.
Discussing US-India relations, Krugman noted that India’s position as a strategic partner is strengthening. “India is not seen by the United States as a strategic threat,” he said, a notable difference from how the US views China.
As a result, Krugman believes India has benefited from its improving ties with the US, particularly in areas such as semiconductors, clean technology, and electric vehicles. However, he cautioned that this partnership could come under pressure if Trump’s return to power ignites a global trade war.
On the broader China issue, Krugman pointed out that the Biden-Harris administration has been “more confrontational with China than Trump was.” While Trump imposed broad tariffs, Krugman noted, “the Biden-Harris team is dead serious about trying to deny China access to advanced technologies and making sure the US is not dependent on China for strategically important stuff.”
He further explained that this ongoing “economic cold war” with China will continue under a Harris administration but could take a far more erratic turn under Trump.
Despite this backdrop of geopolitical tension, Krugman remains cautiously optimistic about India’s prospects. He acknowledged that India has positioned itself well by avoiding significant confrontations and could continue benefiting from the shift away from China in global supply chains.
“India is an up-and-coming emerging market with a lot of potential,” he remarked.