Donald Trump’s ‘Maganomics’ will damage growth, economists tell FT poll

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Donald Galaotega’s vision of reshaping the world’s largest economy with security policies that put “America First” will destroy growth, according to the Financial Times economic research, which contrasts with the bullishness of investors on the plans of the president-elect of US.

Survey of more than 220 US, UK and Eurozone economists on the economic impact of TrumpA return to the White House showed the majority of respondents believe that his security reform will cover the benefits of some aspects of what the president-elect has called “Maganomics”.

Many US economists, who were polled jointly by the FT and the University of Chicago’s Booth School of Business, also believe that Trump’s new statement will stimulate. inflation and lead to more focus from the Federal Reserve on reducing interest rates.

“Trump’s policies may bring short-term growth, but this will be due to a global recession that will come back to hurt the US later,” said Şebnem Kalemli-Özcan, a professor at Brown University. who is also sitting. on the New York Fed’s economic advisory panel. “His standards have also gone up, both in the US and around the world, so we’re going to move into a world of high standards.”

However, many economists – including the IMF, OECD and the European Commission – predict stronger growth in the US than in Europe by 2025.

The American economy continues to outpace its counterparts across the Atlantic since the coronavirus pandemic, growing at an annual rate of 2.8 in the third quarter of last year.

Trump has yet to release a full economic policy prospectus, leaving analysts to base their opinions on pledges and threats made on the campaign trail.

These include plans to impose blanket tariffs of up to 20 percent on all US imports, mass layoffs of undocumented workers, cutting red tape and tax cuts introduced in 2017 forever.

Trump, a “tariff man”, has a long-standing and deeply held belief that the US needs to close its trade deficit and boost domestic production.

“The announced rules include many tariffs and deportations of foreign workers,” said Janice Eberly, a senior official in the Obama administration’s US Treasury now at Northwestern University. “Both are inflationary and potentially bad for growth.”

Overall, more than half of the 47 economists who specialize in the American economy expect a “negative impact” from the Trump program, and another tenth predicts a “significant negative impact”. On the other hand, a fifth of those interviewed expect a positive impact.

The gloom among economists contrasts with investor optimism about Trump’s second term.

US S&P price the index increased in the weeks following Trump’s victory, though it pared some of those gains in December after US ratemakers signaled they would cut rates this year more than previously expected .

In it the best two years run this centuryThe benchmark index ended 2024 at 23.3 percent, after a similar gain in 2023.

Benjamin Bowler, a Bank of America strategist, said this week that “laissez-faire economics, tax cuts and deregulation”, as well as the potential revolution of “AI”, mean that the union it may continue in 2025.

Another FT survey showed that Eurozone economists were more optimistic about the impact of Trump’s policies in their region than in the US, with 13% of respondents saying they expected the negative effect is great and another 72 predicts other negatives. consequences.

For the Eurozone the main concern is productivity, especially in Germanya large environmental economy.

Martin Wolburg, senior economist at Generali Investments, highlighted the possibility of the country’s auto industry being “very targeted” by Trump.

Trump’s threat of 60 percent tariffs on China “could challenge European industries even more,” said Christophe Boucher, chief financial officer at ABN Amro Investment Solutions, as it would raise expectations that Beijing would retaliate. the place with cheap products.

Although the UK is considered the best from the tariffs, due to its large service sector, Alpesh Paleja, the chief economist of the CBI, warned that the country will be exposed to a “second shock” while rates should measure Eurozone growth.

In the UK, more than 56 percent of the nearly 100 respondents expected a negative impact, with many referring to drawing attention to the current state of uncertainty ahead of Trump’s inauguration on 20 January. More than 10 percent predicts good results.

“The Trump administration will be a ‘prediction machine’ that will prevent businesses and households from making long-term decisions easily,” said Barret Kupelian, chief economist at PwC UK. “This will have an economic cost.”