Former U.S. President and 2024 Republican presidential candidate Donald Trump attends the first day of the 2024 Republican National Convention at the Feather Forum in Milwaukee, Wisconsin, on July 15, 2024, with a bandage on his ear. Wounded during an assassination attempt.
Brendan Smirovsky | AFP | Getty Images
Analysts have warned that a second term as president of former President Donald Trump could reignite global inflation as his America-first policies drive up global costs.
Analysts said that Trump’s high-tariff, low-tax economic agenda in his first term was inherently inflationary, but due to the persistence of an “inflationary mentality,” it will be even more damaging this time.
Michael Metcalfe, head of macro strategy at State Street Global Markets, told CNBC’s “Squawk Box Europe” on Tuesday that “Trump’s policy presence in his second term will be even greater than in his first term. Inflation risk.
“Compared to 2016, when inflation was low and inflation expectations were low… 2024 and 2025 are going to be very different,” he continued. “Inflation levels are higher, inflation expectations are higher, and we’re still in that inflationary mindset.”
This could impact price increases domestically, but also outside the U.S., in Asia and Europe.
high tariff president
High tariffs are often viewed as inflationary because they raise the cost of imported goods, allowing domestic producers to raise prices, thereby making consumers pay more. At the same time, tax cuts can stimulate consumer spending, which in turn drives up the cost of goods and services.
U.S. Presidents Joe Biden and Trump have both said they would raise tariffs on China if elected as geopolitical tensions rise between the two major partners.
However, a recent poll of economists shows that a majority of people believe higher inflation He has struggled under Trump because of his hard-line protectionist stance. Those who believe inflation will rise during Biden’s second term attribute it to potentially massive spending plans.
Gareth Nicholson of Nomura Securities said in a note to CNBC that rising inflation could also spread to Asia. He said a Trump presidency would mark an overall “negative risk factor” for Asian equities.
“From a macro perspective, this will lead to inflation (and possibly stagflation) in the global economy and will accelerate more supply chain shifts within Asia,” he wrote, noting that some companies have been diversifying production to mitigate the impact.
in Europe, Goldman Sachs Forecast A report on Friday said a Trump presidency could boost inflation by 0.1 percentage point as higher tariffs put pressure on global trade.
Manulife’s Marc Franklin agreed, writing in a note to CNBC over the weekend that Trump’s preference for further tax cuts and revisiting China tariffs could be “some level of currency.” Re-expansion combination”. As a result, he said he expected a “steepening tendency in the curve” – which would indicate rising inflation expectations, leading to higher interest rates.
Trump’s presidential campaign appeared to gain momentum on Monday as he took on a defiant tone at the Republican National Convention in Milwaukee, two days after surviving a disaster. attempted assassination At a rally in Pennsylvania.
US stocks Shares rose on Monday as investors reacted to improving prospects for the pro-business Republican presidential candidate. However, Analysts warn The backlash is likely to be short-lived given concerns about his protectionist geopolitical agenda.
