In a recent dialogue with Bloomberg, David Kelly, the Chief Global Strategist at JPMorgan, highlighted concerns regarding the economic repercussions of the presidential election. He specifically scrutinized the inclination of former President Trump to augment tariffs on imported goods as a means to diminish income taxes.

Kelly posited that should Trump prevail against Biden and enforce substantial tariff increases, it would essentially concoct a formula for stagflation. “The developments in the debate have notably heightened the probability of a Republican victory come November… Accepting Trump’s declarations at face value, we’re looking at escalated tariffs, which are synonymous with stagflation—they decelerate growth while simultaneously inflating prices,” he explained.

He further warned that the fragile state of the economy is such that any abrupt policy shift could precipitate a downturn, with Trump’s stance on immigration serving as another potential adverse factor. “Taking his immigration rhetoric seriously could lead to a standstill due to the expulsion of undocumented or illegal immigrants. However, whether his statements are credible is debatable, given historical precedents. Nonetheless, it’s a consideration that a policy jolt could indeed plunge the economy into a recession,” Kelly remarked.

Additionally, Kelly shed light on the uncertainty surrounding Trump’s 2017 tax reductions. “If Biden secures reelection, a portion of those tax cuts might extend past 2025, but not all. Conversely, if Trump is reelected, I anticipate the full implementation of those cuts. Coupled with the Congressional Budget Office’s projections on growth and debt, we could see the debt-to-GDP ratio soar to approximately 135% by the early 2030s, rather than the current 122%, leading to a significant escalation in debt if the tax cuts persist, thereby elevating long-term interest rates,” he stated.

Kelly did not delve into the economic forecast under a potential second term for Biden.

Earlier in April, Jamie Dimon, CEO of JPMorgan Chase, expressed his belief that Biden’s economic strategies are yielding partial success. “The infusion of such capital guarantees growth, and some of it was necessary, like certain industrial policies. The bipartisan infrastructure initiative is commendable. Yet, it’s questionable whether the average American, especially those in rural or inner-city areas, feels uplifted by the current economy,” he commented.

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