Still, I have maintained that market discipline (not least from bond vigilantes) and a still-independent Fed would constrain these stagflationary policies, giving Trump’s moderate economic advisers the upper hand and leading to a de-escalation of trade frictions via negotiations.
Since US President Donald Trump’s election last year, I have argued that at least some of his policies will lead to higher growth and lower inflation over time. This applies to his support for tech-industry innovation, deregulation, lower tax rates on labour and corporations, enhanced energy production, and cuts to wasteful public spending.
Trump’s other policies, however, are stagflationary. Protectionism and tariffs will slow growth and increase prices, as will his administration’s crackdown on immigration, cuts to scientific research funding, attacks on academic institutions, support for unfunded budget deficits, threats to Federal Reserve independence, disorderly attempts to weaken the dollar, attacks on the rule of law, and corrupt behaviour. The US brand has been badly damaged, and that will have costs.
