The possibility of a second term for former President Donald Trump is raising concerns among analysts, who predict that his “America-first” policies could lead to a surge in global inflation.
What Happened: Analysts are warning that Trump’s re-election could have inflationary consequences, CNBC reported on Tuesday. Trump’s first term, characterized by high tariffs and low taxes, could have an even more pronounced inflationary effect if repeated.
“There’s a bigger risk that Trump’s policies will be more inflationary in a second term than they would have been in the first,” said Michael Metcalfe, head of macro strategy at State Street Global Markets.
"Compared to 2016, when inflation had been low forever and inflation expectations were low … 2024, 2025 is going to be very different," he continued. "The level of inflation is higher, inflation expectations are higher, and we're still in this inflation mindset."
Analysts are concerned that this inflationary mindset could lead to price increases both domestically and internationally, particularly in Asia and Europe.
Nomura‘s Gareth Nicholson noted that the increased inflation could also affect Asia. He described a Trump presidency as an overall “negative risk factor” for Asian stocks.
Goldman Sachs forecasted in a note on Friday that a Trump presidency could contribute to a 0.1 percentage point rise in inflation in Europe, citing increased tariffs impacting global trade.
Trump’s potential re-election has also sparked concerns about increased tariffs on China, further exacerbating global inflation, according to the report. A recent poll of economists indicated that the majority foresee higher inflation under a second Trump term due to his hard-line protectionist stance.
Why It Matters: The potential for a second Trump term has been a topic of concern in the financial world. A top economist recently suggested that a robust AI stock rally fueling the stock market bubble could face an early burst if Trump wins the 2024 election. The economist expressed concerns about the potential impact of Trump's proposed policies on tariffs and immigration on the economy.
A recent survey conducted by The Wall Street Journal suggests that most economists believe that a potential win for former President Trump in the upcoming presidential election could result in a surge in inflation, deficits, and interest rates, higher than under a continued President Joe Biden administration.
Trump, in a recent episode of the All-In podcast, highlighted the significance of regulations and taxes in driving economic growth. “I say regulation, regulation, and taxes, okay? I gave the biggest tax cut in the history of our country, a lot to businesses,” Trump said.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
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