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Donald Trump’s vision to reshape the world’s largest economy through protectionist policies that put “America first” will hurt growth, according to a Financial Times poll of economists, which contrasts with investors’ appetite for plans to the US president-elect.
Polls of more than 220 economists in the US, UK and eurozone on the economic impact of Trump’s return to the White House showed that most respondents believed his protectionist shift would overshadow the benefits of other elements of what the president elected has called it “Maganomics”.
Many US economists, who were polled jointly by the FT and the University of Chicago Business School, also believe a new Trump term will boost inflation and lead to more caution from the Federal Reserve about cutting rates. of interest.
“Trump’s policies may bring some growth in the short term, but this will be at the expense of a global slowdown, which will then come back and hurt the US later,” said Şebnem Kalemli-Özcan, a professor at Brown University, who also sits. on the New York Fed’s economic advisory panel. “His policies are also inflationary, both in the US and in the rest of the world, so we will move into a stagflationary world.”
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However, most economists – including the IMF, the OECD and the European Commission – predict stronger growth in the US than in Europe in 2025.
The US economy has consistently outperformed its counterparts across the Atlantic since the coronavirus pandemic, expanding at an annual rate of 2.8 percent in the third quarter of last year.
Trump has yet to present a comprehensive economic policy prospectus, leaving analysts to base their views on promises and threats made on the campaign trail.
These include plans to impose total tariffs of up to 20 percent on all US imports, mass deportations of undocumented workers, cutting red tape and making permanent the tax cuts introduced in 2017.
Trump, a self-described “tariff man,” has a long-held and deep-seated belief that the U.S. should close the trade deficit and boost domestic manufacturing.
“The announced policies include significant tariffs and deportations of immigrant workers,” said Janice Eberly, a former senior Obama administration Treasury official now at Northwestern University. “Both tend to be inflationary and likely negative for growth.”
Overall, more than half of the 47 economists polled specifically about the US economy expect “some negative impact” from Trump’s agenda, and another tenth predict a “large negative impact”. On the other hand, a fifth of respondents expect a positive impact.
The gloom among economists contrasts with investor optimism about Trump’s second term.
The U.S. S&P equity index rose in the weeks after Trump’s victory, although it pared some of those gains in December after U.S. rate-setters signaled they would make fewer rate cuts this year than previously expected.
In its best two-year period this century, the benchmark index closed 2024 up 23.3 percent, after a similar gain in 2023.
Benjamin Bowler, a Bank of America strategist, said this week that Trump’s “free economy, tax cuts and deregulation,” along with a “potential AI revolution,” meant the rally was likely to continue. in the year 2025.
A separate poll by the FT showed that Eurozone economists were even more pessimistic about the impact of Trump’s policies on their region than those in the US, with 13 percent of analysts saying they expected a large negative effect and 72 percent of others predicted some negatives. the consequences.
For the Eurozone, the main concern is manufacturing output, especially in Germany, the region’s largest economy.
Martin Wolburg, senior economist at Generali Investments, highlighted the possibility that the country’s auto industry will be “particularly targeted” by Trump.
Trump’s threat of a 60 percent tariff on China “could further challenge European industries,” said Christophe Boucher, chief investment officer at ABN Amro Investment Solutions, as it would increase the possibility of Beijing flooding the region with cheap products.
While the UK is seen as better insulated from tariffs thanks to its large services sector, Alpesh Paleja, chief economist at the CBI, warned that the country would be exposed to a “second round impact” if tariffs weigh on growth Eurozone.
In the UK, more than 56 per cent of the almost 100 respondents expect a negative impact, with many talking of a drag on sentiment from the prevailing climate of uncertainty ahead of Trump’s inauguration on January 20. Just over 10 percent predict a positive impact.
“The Trump administration will be an ‘unpredictability machine’ that will prevent businesses and households from making long-term decisions with ease,” said Barrett Kupelian, chief economist at PwC UK. “This will inevitably have an economic cost.”
