As President-elect Donald Trump heads toward the White House for a second term, there’s no shortage of opinions about what’s next for the U.S. economy. Some say there’s optimism, while others worry about rising inflation and slower growth. But one thing’s for sure: even with a few bumps in the road, economists believe America is still in a better position than Europe.
A recent survey of more than 200 economists, including experts from the U.S. and Europe, sheds some light on what they think will happen under “Trump 2.0.” The research, conducted by the Financial Times and the University of Chicago’s Booth School of Business, paints a picture of cautious concern.
The Trump Effect: Growth vs. Inflation
Many economists see Trump’s signature policy, “Maganomics”, as a mixed bag for the U.S. economy. On one hand, his tax cuts and more free-market approach could give the economy a boost by encouraging consumer spending and confidence. But on the other hand, rising tariffs—especially the proposed hikes of 60% on countries like China and 10-20% on others—are a cause for concern. A lot of experts think these tariffs could lead to higher prices, which might slow down consumer spending and put a dent in overall growth.
In fact, more than half of U.S. economists in the survey believe Trump’s policies will have a “negative effect” on the economy. Around 10% even think the impact could be “large negative.” But it’s not all doom and gloom. Some economists believe the free-market approach could help boost the economy. However, when it comes to inflation, many worry the higher costs from tariffs might hurt people’s wallets more than it helps.
Europe’s Woes: It Could Be Worse
While the outlook in the U.S. isn’t looking perfect, things aren’t any better across the Atlantic. A separate survey of economists in the Eurozone found that 72% expect Trump’s policies to negatively impact Europe, with 13% thinking it will be significantly worse. It’s clear that Europe is bracing for the potential ripple effects of a Trump presidency, and many are worried about what that means for their economy.
The Public vs. The Experts: A Big Disconnect
Interestingly, the views of economists don’t match up with the public’s optimism, especially among Republican voters. A December Gallup survey found that a whopping 88% of Republicans expect the stock market to rise under Trump, and 87% believe inflation will stay in check. Not surprisingly, 78% predict the economy will thrive, though there’s a big gap with independent voters (40%) and Democrats (15%) who aren’t as confident.
Meanwhile, Wall Street isn’t exactly throwing a party either. Jamie Dimon, a Wall Street veteran, has said that bankers are “dancing in the street” at the thought of fewer regulations. But overall, the economic outlook still feels a bit cautious.
The Tariff Effect: Higher Prices, Lower Growth?
Economists are particularly worried about the impact of higher tariffs. According to Goldman Sachs expert Ronnie Walker, the direct effect of increased tariffs on U.S. GDP will likely be modestly negative. The bigger worry? Higher prices from tariffs could slow down consumer spending. If other countries retaliate, it could worsen the situation, leading to trade disruptions and uncertainty in business.
Walker’s prediction is that for every 1% increase in tariff rates, the U.S. GDP could shrink by as much as 0.1%. While the direct impact of tariffs may seem small, the indirect effects—like nervous financial markets, sour business sentiment, and supply chain issues—could end up causing bigger problems in the long run.
