Morgan Stanley warns of economic consequences of upcoming presidential election
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Morgan Stanley’s Chief Global Strategist David Kelly discussed former President Trump’s proposal to raise import tariffs to lower income taxes in an interview with Bloomberg. He stated that if Trump wins and increases tariffs, it could lead to stagflation – a combination of slow growth and rising inflation.
Kelly pointed out that the debate has increased the chances of a Republican victory in November. He emphasized that higher tariffs could slow down economic growth and exacerbate inflation, leading to stagflation.
Kelly also mentioned that the current economy is very fragile, and any political shock, such as Trump’s radical stance on immigration, could trigger an economic downturn. He noted that Trump’s potential immigration policies, including deporting undocumented individuals, are another risk factor.
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Kelly also addressed the uncertainty of Trump’s tax cuts in 2017, clarifying that if Biden is reelected, some of the tax cut policies may continue beyond 2025, but not all of them. In contrast, a Trump victory could lead to a comprehensive extension of tax cut policies, increasing national debt and leading to higher long-term interest rates.
Kelly did not provide a specific commentary on the economic outlook for Biden’s second term. However, Morgan Stanley CEO Jamie Dimon previously mentioned that he believes some of Biden’s current economic policies are effective. Dimon praised infrastructure spending and the benefits of bipartisan support, but he pointed out that some rural and urban Americans may not feel the positive economic impact.
