BusinessPostCorner.com
No Result
View All Result
Thursday, June 19, 2025
  • Home
  • Business
  • Finance
  • Accounting
  • Tax
  • Management
  • Marketing
  • Crypto News
  • Human Resources
BusinessPostCorner.com
  • Home
  • Business
  • Finance
  • Accounting
  • Tax
  • Management
  • Marketing
  • Crypto News
  • Human Resources
No Result
View All Result
BusinessPostCorner.com
No Result
View All Result

Will Trump’s economic policies really cause ‘the mother of all stagflations’? Here’s what experts say

June 22, 2024
in Business
Reading Time: 3 mins read
A A
0
Will Trump’s economic policies really cause ‘the mother of all stagflations’? Here’s what experts say
ShareShareShareShareShare

Harvard economist and former Treasury Secretary Larry Summers fears Trump’s economic proposals and penchant for trade wars could lead to a serious bout of stagflation—the toxic combination of high inflation and low growth that wreaked havoc on the U.S. economy in the 1970s. 

The Federal Reserve has been hoping to prevent this scenario with its policies for years now, but that work could be undone with a few swipes of the pen, at least according to Summers.

“Trump’s tax proposal to replace a major amount of income-tax revenue with tariffs is a prescription for the mother of all stagflations,” the economist wrote in a June 15 tweet. “It burdens the middle class and the poor who purchase goods on international markets. It would also create worldwide economic warfare.”

Trump has said that if he’s re-elected this November, he will impose a 10% tariff on all products imported into the U.S., while also slashing the corporate tax rate from 21% to as low as 15%.

Summers didn’t pull any punches in his critique of that economic agenda last week, warning that Trump’s tariff proposals are likely to cause a significant supply shock in the U.S. as foreign goods suppliers pull back on shipping products to the U.S. or raise prices amid a brewing trade war.

All of that will exacerbate inflation, and could force the Fed to hike rates even more aggressively. The fed funds rate is already at the highest level in 23 years. Summers even said he could see a scenario where mortgage rates surge above 10% for the first time since the 1980s if Trump’s tariffs go through.

“I don’t think there’s been a more inflationary presidential economic policy platform in my lifetime,” he told Bloomberg TV. “This is really dangerous stuff.”

To Summers’ point, the non-partisan Peterson Institute for International Economics found that Trump’s 10% tariffs on all imported goods, when coupled with the more hefty 60% proposed levy on Chinese imports, would cost the typical middle-class household roughly $1,700 a year in additional costs due to inflation.

Beyond the threat of aggressive tariffs and trade wars, Summers criticized Trump’s desire to curb immigration sharply at a time when an abundant labor supply has helped prevent significant wage pressures that can exacerbate inflation.

“And he’s for scaling back the subsidies to renewable energy, raising energy costs,” Summers added. “So look at it from demand, look at it from supply. This is a prescription for a major increase in inflation.”

However, Bob Elliott, a former Bridgewater exec who now runs Unlimited Funds, argued that only part of Summers’ forecast seems valid in his view. “Tariffs, at their core, are a regressive tax that is inflationary,” Elliott told Fortune. “But they’re also a modest support to U.S. economic conditions.”

Elliott argued that tariffs will, on the margin, bring some goods production back to the U.S. and mildly increase tax revenues. He also noted that Trump’s tax cuts will have a similarly stimulative effect for economic growth by boosting asset prices. 

Still, while Elliott doesn’t foresee anything like the “mother of all stagflations” that Summers is predicting, he doesn’t believe Trump’s policies are the right choice in the current economic environment.

“It would have been a more appropriate set of policies when we were dealing with a low growth environment, with concerns about longer-term deflation,” the Wall Street veteran told Fortune. “We’re kind of in the opposite circumstances today, where growth is pretty good and inflation is too elevated. So the policy is just not consistent with the macroeconomic dynamics that are really in play today.”

Subscribe to the Fortune Next to Lead newsletter to get weekly strategies on how to make it to the corner office. Sign up for free before it launches on June 24, 2024.

Credit: Source link

ShareTweetSendPinShare
Previous Post

Tiger mosquitos, Asian hornets and bed bugs: What climate change means for Europe’s ‘pest demographics’ haunting the Paris Olympics

Next Post

France’s political extremes exploit Macron’s weakness

Next Post
France’s political extremes exploit Macron’s weakness

France’s political extremes exploit Macron’s weakness

Hedge fund Millennium valued at bn in minority stake sale talks

Hedge fund Millennium valued at $14bn in minority stake sale talks

June 16, 2025
US housing construction falls to 5-year low as tariffs weigh on sector

US housing construction falls to 5-year low as tariffs weigh on sector

June 18, 2025
Port of LA imports fell nearly 20% in May, and it may mean higher prices and fewer choices on back-to-school and Halloween items

Port of LA imports fell nearly 20% in May, and it may mean higher prices and fewer choices on back-to-school and Halloween items

June 16, 2025
As Harvard’s and Yale’s private equity holdings go on sale, buyers can use this technique for 1,000% windfalls. ‘It makes your brain melt’

As Harvard’s and Yale’s private equity holdings go on sale, buyers can use this technique for 1,000% windfalls. ‘It makes your brain melt’

June 15, 2025
From seasonal spikes to steady growth: a new revenue strategy for accounting firms

From seasonal spikes to steady growth: a new revenue strategy for accounting firms

June 16, 2025
Israel launches major attack on Iran

Israel launches major attack on Iran

June 13, 2025
BusinessPostCorner.com

BusinessPostCorner.com is an online news portal that aims to share the latest news about following topics: Accounting, Tax, Business, Finance, Crypto, Management, Human resources and Marketing. Feel free to get in touch with us!

Recent News

New York Officials Seize 0K From Facebook Crypto Scam Targeting Russian Speakers

New York Officials Seize $440K From Facebook Crypto Scam Targeting Russian Speakers

June 19, 2025
Russia on brink of recession, says economy minister

Russia on brink of recession, says economy minister

June 19, 2025

Our Newsletter!

Loading
  • Contact Us
  • Privacy Policy
  • Terms of Use
  • DMCA

© 2023 businesspostcorner.com - All Rights Reserved!

No Result
View All Result
  • Home
  • Business
  • Finance
  • Accounting
  • Tax
  • Management
  • Marketing
  • Crypto News
  • Human Resources

© 2023 businesspostcorner.com - All Rights Reserved!