Economists think Trump’s MAGAnomics will hurt America

Donald Trump’s MAGAnomics (a cocktail of tariffs, immigration crackdowns, and deregulation) is dividing opinion across the board. Economists worldwide are tearing apart his “America First” blueprint, warning that the plan is a ticking time bomb.

According to a poll by the Financial Times and the University of Chicago, most economists believe Trump would make inflation worse, cripple growth, and spread economic chaos far beyond U.S. borders.

Trump hasn’t dropped a detailed economic roadmap yet, leaving analysts to piece together predictions based on his campaign promises.

His greatest hits? Slapping tariffs as high as 20% on imports, deporting undocumented workers en masse, and making 2017 tax cuts permanent. While Wall Street enjoys the short-term rally, the big brains say this “tariff man” approach is flirting with disaster.

The global effects

Şebnem Kalemli-Özcan, a Brown University professor and New York Fed adviser, reportedly thinks: “Trump’s policies can bring some growth in the short term, but this will be at the expense of a global slowdown which then will come back and hurt the U.S. later on.”

The Eurozone is already bracing for a hammering, especially Germany’s manufacturing sector. Martin Wolburg of Generali Investments predicts Trump’s policies could target Germany’s car industry. 

But Christophe Boucher from ABN Amro fears cheap Chinese goods could flood European markets if Trump’s tariffs squeeze Beijing.

Over 85% of the Eurozone economists surveyed expect Trump’s moves to hurt their economies. Even the UK, supposedly cushioned by its services-heavy economy, isn’t safe.

Wall Street parties, but economists aren’t buying it

While economists clutch their spreadsheets in despair, investors are popping champagne. The S&P 500 surged after Trump’s win, closing 2024 with a 23.3% gain, following a similar performance in 2023. The AI hype, tax cuts, and deregulation have energized the bulls.

Benjamin Bowler of Bank of America predicts the rally will keep rolling into 2025, driven by what he calls Trump’s “laissez-faire economics.” Crypto isn’t missing out either. Bitcoin smashed through the $100,000 mark, hitting $108,007 after Trump’s win.

Investors are banking on Paul Atkins, Trump’s pick for SEC head, to usher in a friendlier crypto environment. While Trump’s talk of adding Bitcoin to U.S. reserves has been dismissed as a pipe dream, the speculation alone has sent markets into overdrive.

Still though, more than half of U.S. economists surveyed believe MAGAnomics will do more harm than good. Another 10% expect a “large negative impact.” Even in the Eurozone, 13% of analysts predict severe repercussions. This disconnect between markets and economic fundamentals has us scratching our heads.

A chaotic outlook for 2025 and beyond

The U.S. economy has been outperforming Europe since the pandemic, growing at an annualized rate of 2.8% in Q3 2024. But inflation remains stubborn, and the Federal Reserve isn’t budging on rate cuts.

Futures traders hoping for monetary easing in 2023 and 2024 were left hanging. The dollar index rose 6.5% last year, putting pressure on emerging markets and global trade with its relentless strength.

Meanwhile, bond yields are creeping back to pre-2008 levels. The average 10-year yield among G7 nations now sits around 3%, double what it was during the last decade.

For Europe, the stakes are even higher. Trump’s protectionist policies threaten to disrupt global supply chains, hitting industries that rely on exports. Germany’s DAX index managed a 19% gain in 2024, but analysts warn the good times won’t last if Trump pulls the trigger on a 60% tariff against China.

Economists also fear the broader unpredictability of Trump’s administration. Barret Kupelian from PwC calls it an “unpredictability machine” that will scare off businesses from making long-term decisions. This sentiment is shared across industries, from manufacturing to crypto.

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