Home ECONOMY What will Trump 2.0 policies contribute to the US economy?

What will Trump 2.0 policies contribute to the US economy?


Recently, sixteen Nobel Prize-winning economists penned an open letter criticizing potential tariffs and immigration policies under a second Trump presidency and the lasting impacts they could have on US inflation.

Key Square Group founder and former Soros Fund Management CIO Scott Bessent spoke to Yahoo Finance about his feelings over the economy and how he disagrees with many economists and financial experts, including Morgan Stanley’s Mike Wilson, over their viewpoint.

Bessent believes that Trump’s potential policies will aid where Biden has failed, criticizing the current economy under the Biden administration: “I thought it was a tone-deaf remark by [Treasury] Secretary Yellen, last week, when she said that she hadn’t personally seen inflation at the grocery store. But the vibe session failed. So now we’re in part three, and part three is conjuring a monster that somehow Trump 2.0 — to defy all logic — is going to be inflationary or unbelievably, as [former Treasury Secretary] Larry Summers says, stagflationary. [In] Trump 1.0, we had the non-inflationary growth, some of the strongest growth we’ve had in 50 years…”

Some of these comments were later fact-checked by Yahoo Finance Senior Columnist Rick Newman.

Watch Madison Mills’ full interview with Scott Bessent here.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Nicholas Jacobino

Video Transcript

I want to bring up a quote from Mike Wilson from Morgan Stanley.

He said risks are skewed to the downside for growth under Republican win scenarios due in part to immigration reform and tariffs.

And this echoes concerns more broadly that Trump’s immigration policies would be inflationary because they would raise labor costs.

I mean, this is a real concern from some of the biggest banks on Wall Street.

What is your take on that?

Yeah, a again, I, I know Mike.

Well, uh I think he was wrong on this, I think to think that a Trump 2.0 or let’s, let’s go back to the whole arc of the news cycle.

Uh You know, we, we began six or nine months ago with Biden.

Nos are great and Bidens, you know, the, uh that dog didn’t hunt, uh the American people didn’t like Biden nomics.

Then the news cycle coming out of Delaware, um, you know, and kind of put forward by Paul Krugman, Greg.

Ip Alan Blinder was, well, it’s just really a vibe session.

You know, the American people don’t understand how really good they have it.

Um You know, this inflation wasn’t that bad even I thought it was a tone deaf remark by Secretary Yellen uh last week when she said that she hadn’t public, you know, that she hadn’t personally seen inflation at the grocery store, but you know that the vibe session failed.

So now we’re in part three and part three is conjuring a monster that somehow Trump 2.0 to define all logic is going to be inflationary or unbelievable.

As Larry Summers says, stag inflationary, you know, Trump 1.0 we had the non inflationary growth, some of the strongest growth, you know, we’ve had in 50 years and I think we’re going to have the same thing again because, you know, if you counterbalance, first of all, with the tariffs, traditionally, you know, I’m, I’m a markets guy and economic historian.

Traditionally, you get a 50% what, whatever the level of the tariff is, you get a 50% appreciation of that amount in the currency.

So it’s a 10% tariff.

We get a 5% currency appreciation which takes care of some of the inflationary effects.

We didn’t see inflationary effects with the tariffs on China.

You know, we’ll, we’ll see with the labor, but I personally do not have a problem with the bottom 25% of American workers getting higher wages and the benefits they deserve.

You know, they have been crushed by this, unfettered, unfettered immigration.

But you know, but let’s let’s go back to why Trump 1.0 was disinflationary it, regulations were cut, you know, we had energy dominance and, you know, the, uh, energy prices were low and, you know, I think under those scenarios it’s almost impossible, you know, could they offset each other?

Sure, Scott.

Just to jump in.

I did want to zero in on the immigration piece specifically because there is a real concern that curbing immigration would lead to an increase in labor costs which could fuel some of the inflation that the Federal Reserve has been fighting against.

And we currently have 8 million open jobs.

So the argument that curbing immigration would hinder job openings.

I struggle to see, see that.

Well, we think of it this way, I think the 8 million job openings are, are not the people who are pouring across the border every day.

You know, they’re, they’re not going into jobs at Microsoft and, you know, senior management.

So, you know, I I think that that’s not right.

Um So, and, you know, with the deregulation, what’s really caused a lot of the Biden inflation is you’ve got a demand shock from, you know, this out of control, government spending 7% deficits and then you have a supply constraint from all the regulation.

So, you know, what we didn’t talk about was I believe that a Trump 2.0 is going to get these budget deficits under control.

And that, you know, the theory of the price level says that once the budget deficits go down, inflation will come down.

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