JPMorgan Chase just issued a warning on the economic impact of the presidential election.
In a new interview with Bloomberg, JPMorgan’s chief global strategy officer David Kelly takes aim at former President Trump’s interest in raising tariffs on imports to lower income taxes.
If Trump triumphs over Biden and raises tariffs sharply, Kelly says the former president will have cooked up a recipe for stagflation.
“I think what happened [in the debate] significantly increases the likelihood of a Republican sweep in November…
Now if they delete, if you take Donald Trump at his word, you have much higher tariffs and tariffs are an elixir for stagflation. Tariffs slow growth and increase inflation at the same time.”
Kelly says the economy is weak enough that a political shock could trigger a recession, citing Trump’s approach to immigration as another potentially negative catalyst.
“If we took him at his word on immigration, he would be stopped for deporting undocumented immigrants or illegal immigrants. But I’m not sure if we take him at his word. I think history suggests that it would be foolish to take his word on the matter. But still, something to think about. I mean, a political coup could absolutely send this economy into recession.”
Kelly also points to the future of Trump’s tax cuts in 2017 as a major question mark for the economy.
“The 2017 tax cuts, if Joe Biden is elected, then some of those tax cuts will extend beyond 2025, but not all of them.
If Donald Trump is elected, I expect all of this to pass. And if you add that to what the CBO is already looking at in terms of growth and debt, debt as a share of GDP in the early 2030s will be about 135% as opposed to 122%, so you can have significantly more debt if we extend all these tax cuts, and that means higher long-term interest rates.”
Kelly did not specifically address his economic outlook under a second term for Biden.
In April, JPMorgan Chase CEO Jamie Dimon said he believed Biden’s current economic policies are “partially working.”
“When you spend that kind of money, you’re going to have growth. And we needed a piece of it, as a piece of industrial policy. I think the infrastructure thing is great. It was bipartisan.
I think some of the American public watches it [Biden’s infrastructure spending] like, what are they getting? If you go to rural America or the inner cities, I’m not sure they feel like they’re getting a rise out of this economy.”
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