Downward Angle Icon An icon in the shape of a downward angle. Alex Wong/Getty Images Trump's re-election in November poses the greatest immediate risk to the global economy, Nouriel Roubini has warned. A famous economist pointed out the risks posed by President Trump's economic policies. Roubini said a second Trump term could worsen inflation and national debt problems.
Dr. Doom economist Nouriel Roubini says Trump's re-election could pose the biggest immediate threat to the global economy.
Roubini, known on Wall Street for his exaggerated and consistently negative predictions, wrote in an op-ed for Project Syndicate that the global economy could be “further destabilized” if President Trump wins a second term. I was warned that it was sexual. It came amid existing geopolitical tensions, with wars escalating in Ukraine and Gaza and a cold war potentially erupting between the US and China in the second half of the decade, Roubini predicted. .
Roubini said the biggest risk of disruption comes from President Trump's economic policies, which could open the door to entirely new problems.
Roubini said that under President Trump, U.S. protectionist trade policies will definitely become “tougher.” The former president has already said he would raise the tax rate on U.S. imports from 2% to 10%. He warned that it could spark a trade war between America's most important partners, de-dollarization, further supply chain disruptions and a host of other problems.
“A trade war could depress growth and raise inflation, making it the biggest geopolitical risk for markets to consider in the coming months,” Roubini added.
This is especially problematic for the United States, whose economy is already in a precarious position. According to the latest estimates from the Commerce Department, GDP growth slowed to 3.2% in the fourth quarter. Meanwhile, inflation remains above the Fed's 2% target, with consumer prices rising 3.1% in January.
Roubini also argued that a Trump presidency could pose a risk of stagflation, a scenario in which prices spiral out of control while economic growth remains sluggish. This is due to President Trump's “denialist attitude” on climate change, as well as the possibility that he will replace Fed Chair Jerome Powell with “someone who is more dovish and flexible” and may not cut interest rates prematurely. Roubini suggested that this could allow inflation to rise.
President Trump's promised tax cuts also risk exacerbating the US debt mountain. At the current pace of spending, the U.S. will take on an additional $1 trillion in debt every 100 days, according to a Bank of America analysis.
“Private and public debt is increasing at a high level, which would threaten a financial crisis,” Roubini warned. “Mr. Trump's economic policy agenda now poses the greatest threat to economies and markets around the world.”
Not surprisingly, Mr. Roubini has repeatedly argued over the past 20 years that stagflation, debt, or some kind of financial crisis is on the horizon. He warned the market that a debt crisis due to stagflation could arrive in 2022, causing a painful recession and a 30% drop in stock prices. He later walked back his own forecast, adding in a recent interview with Bloomberg that he feared the economy was doing too well to justify rate cuts that would energize financial markets.
