Nobel Laureate Krugman Says Free Trade Needs a Rethink as Western Economists’ Faith Wavers

Some argue tariffs are needed to counter China

In South America, free-market ideas are spreading in countries that once rejected them

Milei-style calls for a smaller state are gaining ground

Countries’ shifting views on the free-market model are also reshaping how economists in advanced and developing economies see it. Faith in free-market capitalism is weakening among Western economists, while support for the model is growing in the developing world.

One prominent example is Paul Krugman, a professor at the City University of New York. In a recent Bloomberg TV interview, he said the U.S.-Mexico-Canada Agreement should be reconsidered in light of China’s influence.

“I’m not saying we should put tariffs on everything,” Krugman said. “But it has become really hard to avoid taking a much more interventionist stance.”

Financial Times columnist Soumaya Keynes and Chad Bown, a senior fellow at the Peterson Institute for International Economics, made a similar case in their book, “How to Survive a Trade War.” Referring to the decline of Europe’s auto industry, they argued that tariffs should be applied to products whose import share is rising sharply to counter Chinese coercion.

They are not rejecting the idea that free economic activity produces the best outcomes. But they place more weight on the reality that governments must consider that economies and industries still have borders.

The opposite trend is emerging in developing countries, where dependency theory once dominated and treated the free-market system itself as a Western tool for exploiting the Third World. Argentine President Javier Milei has championed “Mileism,” a push to sharply reduce the government’s role.

He describes himself as a libertarian aligned with the Austrian school and has made remarks as extreme as pledging to abolish the central bank.

Mileism, which emphasizes a break from traditional left-wing populism, is spreading across South America. In Paraguay and Bolivia, among other countries, like-minded right-wing politicians are gaining support and winning elections.

Brian Winter, editor-in-chief of Americas Quarterly, wrote in Foreign Affairs that Latin America’s most symbolic leader is shifting from the image of a leftist revolutionary to that of a right-wing figure.

Sang-eun Lee, Washington correspondent, Hankyung.com, selee@hankyung.com