JPMorgan Chase has just issued a warning about the economic impact of the presidential election. In a recent interview with Bloomberg, JPMorgan Chase’s Chief Global Strategist David Kelly addressed former President Donald Trump’s interest in raising import tariffs to reduce income taxes. Kelly stated that if Trump were to defeat Biden and significantly increase tariffs, the former president would be prescribing a remedy for stagflation.
“I do think that what happened in the debates meaningfully increases the chance of a Republican sweep in November… Now, if they do sweep, and if you believe Donald Trump, you will see higher tariffs, and tariffs are a cure for stagflation. Tariffs slow economic growth while also driving up inflation.”
Kelly noted that the economy is already sufficiently weak, and policy shocks could potentially trigger a recession, mentioning that Trump’s immigration policy represents another potential negative catalyst.
“If we believe him on immigration, we will see a halt due to the deportation of undocumented or illegal immigrants. But I am not sure we should believe him on this. History suggests that believing him on this is foolish. But it’s worth thinking about. I mean, some policy shocks could absolutely push the economy into a recession.”
Kelly also highlighted that the future of Trump’s 2017 tax cuts is a major economic question mark.
“The 2017 tax cuts, if Joe Biden is re-elected, some of those tax cuts will extend beyond 2025, but not all of them. If Donald Trump is elected, I expect the whole thing to go away. Adding in the growth and debt considerations the Congressional Budget Office is already looking at, by the early 2030s, the debt-to-GDP ratio will rise from 122% to about 135%. So, if we extend all these tax cuts, you could have more debt, which means long-term interest rates will be higher.”
Kelly did not specifically address his economic outlook for a potential second term of Biden. As early as April, JPMorgan Chase CEO Jamie Dimon had stated that he believed Biden’s current economic policies “partially work.”
“When you spend that money, you get growth. We need part of it, such as some industrial policies. I think infrastructure is fantastic. It is the result of bipartisan cooperation. I think the American public’s view of Biden’s infrastructure spending is, ‘What did we get?’ If you go to rural or downtown America, I’m not sure they feel uplifted by this economy.”
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