The re-election of Donald Trump as president of the United States could become the biggest threat to the world economy, warned the famous economist Nouriel Roubini.
The main problem lies in the fact that the US protectionist trade policy will “get tougher”. According to Nouriel Roubini, a victory of Donald Trump for a second term could lead to “even greater destabilization” of the world economy. He adds that this is happening against the background of existing geopolitical tensions: war in Ukraine and the Gaza Strip, as well as a potential cold war between the US and China that could break out at the end of the decade.
The biggest risk of disruption comes from Trump’s economic policies, which could open the door to a whole host of new problems, argued Nouriel Roubini. Under a possible Donald Trump presidency, protectionist US trade policies will undoubtedly “get tougher”.
The former president has already announced that he will raise taxes on US imports from 2% to 10%. This could spark a trade war between some of America’s most important partners, leading to de-dollarization, supply chain chaos and a host of other problems, warns Nouriel Roubini. “The trade war will lead to slower growth and higher inflation, making it the biggest geopolitical risk that markets should be aware of in the coming months”, added he.
This creates problems for the US in particular, where the economy is already in a precarious position. Fourth-quarter GDP growth slowed to 3.2%, according to the Commerce Department’s latest estimate. Meanwhile, inflation remains above the Federal Reserve’s 2% target, with consumer prices rising 3.1% in January.
Nouriel Roubini also argued that a Trump presidency could lead to the risk of stagflation. This is due to Trump’s “negative stance” on climate change, as well as the likelihood that he will replace Fed Chairman Powell with a “softer, more accommodating guy” who could cut interest rates prematurely and allow inflation to rise to rise, the economist points out.
Donald Trump’s promised tax cuts also risk deepening the US debt trap. At the current rate of spending, the US is adding another 1 trillion USD to its debt every 100 days, according to a Bank of America analysis. “With high levels and growth of private and public debt, this will lead to the threat of a financial crisis”, warns Nouriel Roubini. “The economic policy program proposed by Trump now represents the biggest threat to economies and markets around the world, the economist is convinced.
