Why Trump gets a basic rule of economics 'so wrong': conservative

During a Tuesday, March 31 appearance on MS NOW host Ari Melber's show "The Beat," liberal economist Paul Krugman delivered some bad news about gas prices —which, he warned, are going to get even higher if U.S. President Donald Trump's war against Iran lasts a long time. Krugman explained that "the world has been living on oil that was already in transit," adding, "But that runs out now." And the longer the Strait of Hormuz is blocked — and the worse those "physical shortages" of oil get — Krugman warned, the more prices will skyrocket for a wide range of goods.

"All of a sudden," Krugman told Melber, "this is getting real…. It's going to get really, really ugly if this goes on for an extended period."

Trump has been dismissive of the economic effects that going to war against Iran would have. But Never Trump conservative David Frum, in an article published by The Atlantic on April 1, lays out some things that Trump fails to understand about energy prices.

"On March 31, the national average price of gasoline at the pump surpassed $4, the highest level since the post-pandemic shocks of 2022," Frum explains. "One-fifth of the world's oil and liquefied natural gas usually flows through the Strait (or Hormuz), but hasn't since Iran began impeding the waterway in early March. Yet Trump continues to insist that Iran's partial closure of the strait isn't a problem. Markets don't agree with Trump, and neither do his poll numbers."

Frum continues, "How did Trump get Hormuz so wrong? The answer reveals one of Trump's most characteristic and most fateful mistakes: his steadfast refusal to acknowledge that Americans live in a world economy."

On March 16, Trump bragged that "we get less than 1 percent of our oil from the strait," which, according to Frum, shows that he "fails to understand" that "these geographic details matter little to world energy markets."

"Trump wishes for a United States economy walled off from the rest of the world," Frum writes. "That's why he loves tariffs so much — and why he refuses to think about what they mean to American producers, who now must pay more for inputs such as aluminum. But with energy, there is no walling off. Most of America's oil and gas is produced in the United States. American imports come overwhelmingly from Canada and Mexico. But American oil can be put on a tanker and sent to Japan or the European Union if the price across the ocean rises. The global process of buying and selling equalizes prices worldwide."

Frum continues, "Walling off the U.S. would mean America would have to stop exporting and importing oil. Trump does not want to do that. In fact, he endlessly urges other countries to buy more American oil and gas…. Trump’s inability to comprehend the relevance of Persian Gulf supplies to American motorists may explain how he stumbled into his Iran war in the first place."

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