Analysts predict fiscal policy shifts under potential Trump presidency, leading to modest inflation

From Investing.com: 2024-06-01 04:28:02

Analysts at Nomura predict significant economic policy shifts if Donald Trump returns to the presidency, focusing on tariffs and tax policy. They anticipate extending the provisions of the 2017 TCJA and increased tariffs, leading to modest inflation. Despite limitations on direct influence on monetary policy, higher interest rates are expected due to inflation and fiscal expansion.

Nomura believes consumer prices would rise moderately from Trump’s proposed tariffs, with potential economic growth from business tax cuts mitigating the impact. They foresee a continuation of his aggressive trade stance, including possible tariffs on Chinese imports. However, implementation may not match campaign proposals, but a confrontational approach towards major trading partners is likely.

The expiration of numerous TCJA provisions in 2025 underscores the importance of tax policy in a potential Trump second term. Nomura emphasizes the necessity of congressional approval for changes to tax policy, contrasting it with the President’s authority over tariffs. The composition of Congress will influence Trump’s agenda regarding taxes.



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