US economy becomes unpredictable after presidential election

Some economists now say the US economy could face a surge in inflation if Donald Trump delivers on his campaign promises.

Consumers choose to buy goods at a supermarket in California, USA, May 15, 2024. (Photo: THX/TTXVN)

Investors have grown increasingly confident this year that the US economy will be able to make a “soft landing”. However, the re-election of President Donald Trump is complicating that outlook.

Some economists now say the US economy could face a surge in inflation if Mr Trump follows through on his campaign pledges.

In an interview with Yahoo Finance, Joseph Stiglitz, a Nobel Prize-winning economist and professor at Columbia University, said that the US economy is in a "soft landing" phase, but this phase will likely end on January 20, 2025, when Mr. Trump officially takes office.

Mr Trump and his proposed policies are likely to cause higher inflation, as his campaign pledges included high tariffs on imported goods, corporate tax cuts and immigration restrictions.

These policies could put significant pressure on the already high federal budget deficit and force the US Federal Reserve to reconsider its interest rate path.

Goldman Sachs economist Jan Hatzius said the biggest risk now is the imposition of comprehensive tariffs, which could have a strong impact on economic growth.

Jennifer McKeown, an economist at consultancy Capital Economics, acknowledged that inflation risks rising, largely due to Mr Trump's proposed tariffs and immigration restrictions.

Tariffs were one of Mr Trump’s most talked-about campaign promises. The president-elect has pledged to impose tariffs of at least 10% on all trading partners and 60% on imports from China. Mr Stiglitz has stressed that such tariffs would inevitably cause inflation.

Minneapolis Fed President Neel Kashkari noted that the possibility of other countries retaliating in a trade war would keep inflation high in the long run.

If inflation rises, the Fed will have to raise interest rates, Stiglitz said. He said that combining higher interest rates with retaliation from other countries would slow the global economy. This would lead to the worst-case scenario: an economy that suffers from inflation and stagnation or slow growth.

Investors have begun to adjust their expectations for Fed rate cuts. Since the first cut on September 18, markets are now expecting at least three more rate cuts next year, according to the CME FedWatch tool.

The US economy remains resilient despite rising interest rates. Retail sales in October beat forecasts, GDP growth remains steady, unemployment hovers around 4%, and inflation is down to 2%.

Another factor to note is that it is still unclear which policies will be prioritized when Mr. Trump officially takes office in January 2025. This makes predictions about the future of the US economy difficult./.

(Vietnam News Agency/Vietnam+)

Source: https://www.vietnamplus.vn/nen-kinh-te-my-tro-nen-kho-doan-dinh-sau-cuoc-bau-cu-tong-thong-post994105.vnp