J.P. Morgan Issues Warning on Economic Consequences of Upcoming Presidential Election
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David Kelly, Chief Global Strategist at J.P. Morgan, discussed with Bloomberg the proposal by former President Trump to raise import tariffs in exchange for lowering income taxes. He indicated that if Trump were to win and increase tariffs, it could lead to stagflation—a combination of slow growth and rising inflation.
Kelly noted that the debate has increased the chances of a Republican victory in November. He emphasized that higher tariffs could potentially slow economic growth while exacerbating inflation, leading to stagflation.
Kelly also mentioned that the current economy is very fragile, and any political shocks, such as Trump’s radical stance on immigration, could trigger an economic downturn. He pointed out that Trump’s potential immigration policies, including the deportation of undocumented individuals, pose another risk factor.
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Kelly also discussed the uncertainty surrounding Trump’s tax cuts in 2017, clarifying that if Biden is re-elected, some of these tax policies might continue beyond 2025, but not all. In contrast, a Trump victory could lead to a full extension of tax cuts, increasing national debt and causing long-term interest rates to rise.
Kelly did not specifically comment on the economic outlook for Biden’s second term. However, J.P. Morgan CEO Jamie Dimon previously mentioned that he believes some of Biden’s current economic policies are effective. Dimon praised infrastructure spending and its bipartisan support, but noted that some rural and urban Americans may not feel positive economic impacts.
