Nobel laureates used to scare us with the same grim ones predictions even before his first term, but they did not come true
America’s economy is strong and healthy, but that fact doesn’t seem to have impressed voters overseas, and they’re demanding change. Donald Trump, who will become the 47th president of the United States, does not hide his plans: to cut taxes, impose high tariffs on imported goods, limit migration and bureaucracy.
Now, after his resounding election victory, many have been quick to outline apocalyptic scenarios for the global economy. Financial experts fear that if he implements even a fraction of his promises – from higher tariffs to deregulation, more oil drilling and more demands on US NATO partners – the pressure on federal finances, inflation, economic growth and interest rates percent will be felt in every corner of the world. And these are just some of the potential economic and financial consequences of what some economists call Trumponomics 2.0.
The comforting thing about this situation is that they have already failed once. A check of “24 hours – 168 stories” shows that some of the authoritative scholars who are
most pessimistic
in his predictions
for the development of the American and world economy, were so at the beginning of Trump’s previous term, and with the same arguments, but were largely refuted by subsequent events.
As of now
the main criticisms
go in several
directions
The first has to do with his protectionist policies – as is well known the centerpiece of Trump’s economic agenda is taxing imports with high tariffs. It’s an approach he claims will reduce America’s trade deficit and force other countries to make concessions to the US. In his first term, the president increased tariffs on Chinese goods, and now he has promised much more of the same: to raise tariffs on Chinese goods to 60% and impose a “universal” tax of 10% or even 20% on all other imports.
In that regard, economists Kimberly Clausing and Mary Lovely of the Peterson Institute have estimated that Trump’s proposed 60% tax on Chinese imports and 20% tariffs would lead to
loss for each
middle american
household
from 2,600 dollars per year. What’s more, the economic damage is likely to spread globally. Researchers at Capital Economics have calculated that even just a 10% US tariff would hurt Mexico the worst, with Germany and China also seriously affected.
In addition, according to the researchers, consumers will actually end up being burdened, as US companies, through higher prices, will pass on their higher costs to their customers.
This is why import taxation is usually inflationary. Worse, other countries usually retaliate with tariffs on American goods, thereby hurting the interests of American exporters.
The other big risk
internationally,
which experts have already warned about, is that the new president’s policy will have an extremely negative impact on European industry. With the re-election of Trump, the risks to the world economy will intensify, warns the International Monetary Fund (IMF).
One of the main victims of the widening gap in trade and economic ties between the three blocs could be the European Union (EU).
The “Trump effect” could sharply reduce the income of European giants dependent on the American market. In this regard, analysts from the British bank Barclays have already compiled a “basket of shares” of 28 major European companies whose products will be subject to higher tariffs when imported into the United States while Trump is in power.
“Most of the damage will be done under a universal import tariff,” said Rogier Quadvlig of Amsterdam-based influential bank AB
Trump’s victory in the US presidential election could lead to a drop in commodity prices, more experts warn.
trade war with Beijing
due to a sharp increase in tariffs on imported goods from China will hit the export potential of the world’s second largest economy. As a result of the trade confrontation with Washington, production volumes in China itself will begin to gradually decrease. This circumstance will lead to a decrease in global demand for raw materials, as China is one of the main consumers of oil and oil products, Lenta Ru writes. And for oil, gold, aluminum and other commodities, the strong dollar is a negative factor.
In fact, already at the end of June, 16 of the most famous economists in the world – all of them Nobel laureates – issued a warning that if Trump wins, it can cause inflation.
“Many Americans are concerned about inflation, which has fallen remarkably quickly. There is rightly concern that Donald Trump
with its fiscally irresponsible budgets,” the letter, signed by economists including Joseph Stiglitz, a Columbia University professor who won the 2001 Nobel Prize in Economics, also said.
In numerous op-eds – both on social media and in some of the most authoritative economic publications – Stiglitz, a neo-Keynesian, lambasted the Republican candidate’s policies throughout his campaign, saying that Donald Trump “is certainly a very big risk for the world economy”.
Curiously, he did the same in the previous election won by Trump. For example, in 2016, Stiglitz told CNBC that “Donald Trump would be a nightmare as president because he would make relations with other countries extremely difficult and thus put the US economy at risk,” adding that the Republican candidate
“no deep
understanding of economics,
except he knows how to bankrupt her. I certainly think he is a very big risk to the world economy. I think the damage he has already done with his rise is a strong instability in the global financial and trading system. We can only hope he doesn’t bankrupt the country.”
But it’s not just him. Paul Krugman, another winner of the world’s most prestigious honor in the field of economics, also recently warned: “Trump’s tariffs could cause a spike in global poverty – and from there it is very easy to imagine a global conflict.”
And in November 2016, Donald Trump’s victory in the US election had not yet subsided when the eminent economist Krugman convincingly sealed the fate of the global economy.
“Trump will deliver
global recession”,
announced the winner of the Nobel Prize in Economics on Twitter. A few days later, he added a few more lines to the same effect in his regular New York Times column. Other economists did not react as strongly, but were generally certain that such a shock, with Trump in the White House, would have economic consequences for everyone.
Coincidentally or not, but only a year after he came to power, no one was talking about such dramatic consequences. Even on the contrary – in economic terms, Trump exceeded all expectations. On the international stock exchanges, indices rushed from one record to the next. World trade also developed exceptionally well, with global economic growth positively surprising observers. Trump’s announced “America first” plan (America first) remained just a buzzword, and the then predicted trade war between the US and China also did not happen. But first of all we have to give credit to
the positive surprises in
industrialized countries such as the USA, Japan and the Eurozone during that period.
Economists generally like to talk about risks, but the truth is that with their votes, tens of millions of Americans expressed their confidence that Trump can restore the low prices and economic stability they remember from his first term – at least until the COVID-19 recession in 2020, it did
It is for this reason that Trump won the chance to define US policy for the next 4 years, and his team has more than enough confidence to make deep changes. Is there enough wisdom?
The world will soon find out…
How could Trump’s economic strategies affect international relations and global trade dynamics?
Interview between Time.news Editor and Economic Expert on the Impact of Trump’s Policies
Time.news Editor: Welcome, everyone, to our special interview segment. Today, we have the pleasure of speaking with Dr. Emily Thompson, a renowned economist and expert in global trade, to discuss the implications of Donald Trump’s recent election win and his economic policies moving forward. Dr. Thompson, thank you for joining us!
Dr. Emily Thompson: Thank you for having me! It’s a pleasure to be here.
Editor: Let’s dive right in. Following Trump’s election victory, many economists have voiced concerns about his proposed policies. What do you see as the most significant risks to the global economy if he goes ahead with his plans, particularly regarding tariffs and deregulation?
Dr. Thompson: That’s a crucial question. The centerpiece of Trump’s economic agenda seems to be increasing tariffs significantly on imports, especially from countries like China. This approach could lead not just to heightened trade tensions but also significantly higher prices for American consumers. Economists estimate that families could face burdens of around $2,600 per year due to these tariffs. Additionally, if other countries retaliate, which is likely, American exporters could find themselves at a distinct disadvantage.
Editor: It’s clear that trade dynamics would be deeply affected. You mentioned retaliation—could you elaborate on how that might play out and its potential global repercussions?
Dr. Thompson: Certainly. When the U.S. raises tariffs, affected countries may respond with their own tariffs on American goods. This tit-for-tat can escalate into a full-blown trade war, impacting industries not just in the U.S., but also in major economies like Germany and Mexico, which heavily rely on trade with the U.S. Ultimately, this could lethargically ripple through the global economy, reducing economic growth and leading to widespread instability.
Editor: We’ve seen notable figures like Paul Krugman and Joseph Stiglitz express grave concerns over Trump’s fiscal policies. Their past predictions didn’t pan out during his first term. Do you think a similar pattern could emerge again, or are the stakes higher this time?
Dr. Thompson: While it’s true that many predictions during his first term didn’t materialize in the way some feared, the economic landscape is different now. We’re already witnessing inflationary pressures and supply chain disruptions exacerbated by the pandemic. If Trump’s policies lead to further fiscal irresponsibility, we could see inflation rates skyrocket, which could lead to exacerbating issues related to poverty—something that both Stiglitz and Krugman have warned about. The global economy is very interconnected; a downturn in one region can have a domino effect worldwide.
Editor: That brings us to a vital point: the potential impact on domestic markets. How might Trump’s proposed tariffs specifically affect the U.S. economy and its consumers?
Dr. Thompson: The immediate impact will likely be felt through increased prices on consumer goods. Higher tariffs mean that importers will raise their prices to cover these costs, and these costs will inevitably be passed on to consumers. This inflationary trend could limit consumer spending, which is essential for economic growth. Moreover, as companies feel the strain of rising costs, we could see reduced investment in the U.S. workforce, impacting job growth.
Editor: It sounds like a conflicting situation where policies aimed at protecting American jobs could ultimately harm those very jobs. What about international markets? What should we expect in terms of commodity prices, particularly oil and other essential materials?
Dr. Thompson: Good point. As tariff strategies reduce global demand—especially from major consumers like China—we could anticipate a drop in commodity prices. This would particularly affect markets reliant on exporting these materials. Additionally, a strong dollar stemming from U.S. monetary policy could make American exports more expensive abroad, further complicating trade relations and potentially leading to reduced global demand.
Editor: Lastly, Dr. Thompson, if we take a step back to assess the bigger picture, how might President Trump’s economic policies influence the global political climate?
Dr. Thompson: That’s a thought-provoking question. Economic policies are deeply intertwined with political relations. An escalation in trade hostilities could heighten geopolitical tensions, impacting everything from security collaborations to environmental agreements. If tariffs lead to increased poverty in developing nations, we might also see social unrest and even conflicts.
Editor: It sounds like we’re at a pivotal moment that requires close monitoring and strategic responses. Thank you, Dr. Thompson, for your insightful analysis today.
Dr. Thompson: Thank you for having me. These are indeed crucial discussions that we must continue to have as the global landscape evolves.
Editor: Thank you to our audience for joining us for this important conversation. Stay tuned for more updates on economic and political developments. Until next time!
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This interview captures the nuanced perspectives on Trump’s potential policies and their far-reaching effects globally, while keeping it engaging and informative for the audience.