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Nobel Prize winning Economists warn inflation will ‘reignite’ under a Trump Presidency

Nobel Prize winning Economists warn inflation will ‘reignite’ under a Trump Presidency

With the presidential election in a few months and the first debate scheduled for June 27, tensions and discussion over the various aspects of both leading candidates – Joe Biden and Donald Trump – are again heating up.

Given the current state of inflation, interest rates, and the stock market, which simultaneously feels exceptionally strong and frighteningly fragile, it is hardly surprising that the economy is in sharp focus.

While the Republicans tend to boast of their financial prowess – and indeed, some of Trump’s popularity hinges on him being a billionaire – leading economists apparently vastly prefer Joe Biden.

Late on June 25, a letter, signed by 16 Nobel Prize-winning economists and urging for a second term for the democratic candidate, was unveiled

Why are economists warning against a Trump presidency?

Though not shy about their differences, the experts all agree that Trump’s economic plans are substantially inferior and will likely lead to a renewed inflation surge.

Indeed, the Republican candidate is expected to extend and possibly make the tax cuts permanent while increasing tariffs. 

He is also expected to pressure the Fed to lower interest rates, which, along with the guarantee of additional cash in hand stemming from the tax policy, is likely to see inflation rocket again.

Trump’s tariffs could jeopardize the tech sector

The tariff idea came under fire earlier this week as Goldman Sachs (NYSE: GS) concluded that the policy would lead to a strengthening of the U.S. dollar (USD) – an outcome opposite to Trump’s reported goals given that USD has already risen significantly under Biden.

An increase in tariffs could also have adverse effects on companies heavily reliant on foreign imports – such as many hardware firms operating in the technology sector. 

It is important to note that China, likely to be hit with a 60-100% rate under a Trump presidency, is a major exporter of various minerals crucial for big tech firms.

Which candidate will be better for the U.S. national debt?

Looking at historical data, a second Trump presidency could also lead to a rocketing in the national debt as Republicans have, despite their reputation for frugality, borrowed more on average than the Democrats. The possibility of continued tax cuts only increases the risk that the pace of debt-taking will continue rising under Trump.

Still, Finbold research focusing on the increase in U.S. national debt following the 2008 crisis found that Biden has, in his first three years, increased the burden by the same amount as Trump through his entire first term.

Finally, both the Nobel Prize-winning economists’ concerns and historical records cast doubt on the strength of the stock market under Trump as, again, it has done better on average under Democratic Presidents.

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