JPMorgan Chase just issued a warning about the economic impact of the presidential election.
In a new interview with Bloomberg, JPMorgan's chief global strategist David Kelly criticized former President Trump's push to raise import tariffs to lower income taxes.
If Trump defeats Biden and raises tariffs significantly, Kelly said, the former president will come up with a recipe for stagflation.
“I do believe that what happened [in the debate] significantly increases the likelihood of a Republican victory in November...
Now, if they pass, if you take Donald Trump at his word, you will have much higher tariffs, and tariffs are the elixir for stagflation. Tariffs slow growth and at the same time drive up inflation.”
Kelly believes the economy is so weak that a political shock could trigger a recession, citing Trump's approach to immigration as another potentially negative catalyst.
“If we took him at his word on immigration, it would stop because of the deportation of undocumented or illegal immigrants. But I'm not sure we'll take his word for it. I think history shows that it would be foolish to take his word for it on this matter. But still, there is something to think about. I mean, some kind of political shock could definitely push this economy into recession.”
Kelly also points to the future of Trump's 2017 tax cuts as a major question for the economy.
“If Joe Biden is re-elected, the 2017 tax breaks will be extended beyond 2025, but not all of them.
If Donald Trump is elected, I expect all of this to go away. And if you add that to what the CBO is already looking at in terms of growth and debt, debt as a share of GDP by the early 2030s will be about 135%, up from 122%, so you could have significantly more debt if we Let's continue all these tax breaks, and that means higher long-term interest rates."
Kelly would not speak specifically about his economic prospects in the event of a second Biden term.
Back in April, JPMorgan Chase CEO Jamie Dimon stated that he believed Biden's current economic policies were "partially working."
“When you spend that kind of money, you will have growth. And we needed some of that as part of industrial policy. I think the infrastructure is amazing. It was bipartisan.
I think part of the American public looks at [Biden's infrastructure spending] as a question of: What are they getting? If you go to rural America or inner cities, I'm not sure they feel like they're being lifted up by this economy.”
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