Episode summary
Krugman 'Shocked' By New Auto Tariff Outlook
Wall Street Week
· · 11 min · Guests: Paul Krugman, Shannon O’Neil
Summary
The episode centers on the North American auto industry as the clearest test case for USMCA and for President Trump’s trade agenda. The host shows how vehicles and parts move repeatedly across the U.S., Canada, and Mexico, with Linamar CEO Jim Jarrell describing a supply chain that goes from Mexico to the U.S., then Canada, then back again before final assembly. Shannon O’Neil argues that this regional integration is the source of the industry’s competitiveness, affordability, and innovation, and that pulling it apart would make cars more expensive and less competitive globally.
Paul Krugman says the real threat is not Canada or Mexico but China, which he says can use North America as a backdoor into the U.S. market. He says conditional tariffs on Chinese cars may be necessary and that Europe is facing a similar choice about protecting strategic manufacturing capacity. At the same time, he and O’Neil both argue that the biggest risk to investment and jobs is policy uncertainty: businesses need predictable rules more than constantly shifting negotiations. Krugman says the U.S. should preserve a true free-trade area, and even prefers a more permanent tariff regime over rolling uncertainty.
Key takeaways
- Linamar CEO Jim Jarrell says auto production is deeply cross-border, with one part moving between Mexico, the U.S., and Canada multiple times before final assembly.
- Shannon O’Neil argues the North American auto industry is competitive because cars and parts are produced across Mexico, Canada, and the United States.
- Paul Krugman says creating more U.S.-only auto production would likely mean a more expensive, less innovative car that would struggle to compete globally.
- O’Neil says the U.S. depends on both imports from Mexico and exports to Mexico and Canada, so trade runs in both directions.
- Krugman says the bigger strategic issue is China, and that conditional tariffs on Chinese cars may be necessary.
- The host and guests agree that uncertainty from rolling negotiations is more damaging than a stable tariff structure.
Notable quotes
“-Stuff does go back and forth. There's a tremendous amount of specialization, which is good for everybody”
“you can't unbake the omelet, right”
“-The strength, frankly, of the U.S. auto industry is really a North American auto industry”
“Could we bring back just a U.S.-produced car? Sure, we could, but it would be a much more expensive car”
“I would almost prefer that Trump put on more tariffs on Canada and Mexico, but committed to keep them in place”
How the episode opens
We start with the poster child for North American trade, the auto industry. Since the USMCA's predecessor, NAFTA, came into effect over 30 years ago, autos have been at the center of negotiations. The reason is simple.
The industry is tightly integrated across northern and southern US borders, borders like the one between Detroit, Michigan and Windsor, Ontario. This is the brand new Gordie Howe International Bridge that spans the Detroit River, separating the Motor City from Windsor. It was named for the famed hockey player who was born in Canada but crossed the border to lead the Detroit Red Wings to four Stanley Cups.
Canada paid for the bridge, but now President Trump has put its opening on hold, which in itself is unlikely to divide the two cities' economies. -Those are not really separate cities. There just happens to be a borderline through them.
Westin: Economist Paul Krugman won the Nobel Prize for his work on trade. -Stuff does go back and forth. There's a tremendous amount of specialization, which is good for everybody.
It reduces costs, increases efficiency. Westin: One of the companies benefiting from that back and forth trade is Linamar, a manufacturer with headquarters outside of Toronto. Jim Jarrell is its CEO.
-So we're 60 years old and really I think when you look at Linamar, we're an advanced manufacturing and product design technology company with 37,000 people global, 87 facilities around the world. Westin: When we talk about the auto part of Linamar's business, how much of your production goes across either the Canadian-U.S. border or the U.S.-Mexican border or for that matter Canada-Mexico?
-I would say a ton. There is so much interconnection, integration between it. And I think we've demonstrated this before.
We have one part that we do for an OEM customer, two OEMs in the U.S.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- auto tariffs
- usmca renegotiation
- cross-border supply chains
- china competition
- investment uncertainty
Companies and tickers mentioned
- Linamar
Watch the episode
Watch “Krugman 'Shocked' By New Auto Tariff Outlook” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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