Paul Krugman has suggested that trade policy designed to retaliate against another country's trade policy would:
Group of answer choices:
A. benefit the multinational firms of both countries
B. benefit the citizens of both countries
C. hurt the multinational firms of both countries
D. hurt the citizens of both countries

D) hurt the citizens of both countries

Explanation:

Paul Krugman is a famous economists that along with Joseph Stiglitz share some unorthodox economic point of views. Both of them earned a Nobel price (Krugman in 2008 and Stiglitz in 2001).

They usually criticize the extreme power of corporations and the inefficiencies of capitalism, and they are both fierce critics of trade barriers. Their argument is simple, trade tariffs aren't paid by corporations, citizens pay for them indirectly. For example, if a trade barrier increases the price of Mexican cars by 20%, US consumers will have to pay a higher price if they want to buy Mexican cars. The car manufacturers will not lose money, they will pass the costs of the tariffs to their customers. And the same applies to every single corporation and every single product that they sell.

On the other hand, if you are a citizen of the exporting country (e.g. Mexico), corporations will hire less workers or lower their wages due to the allegedly negative effects of the trade tariffs.

Whenever you are, on this side of the frontier or the other, citizens always lose while corporations always win.

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