Protectionist policies from Trump and Harris risk US economic stability

Both Trump and Harris exhibit "protectionist tendencies," which could worsen the situation of an already well-developing US economy. They also don't promise "fiscal prudence." "Trumponomics," which prioritises tariffs over taxes, is also a threat.

The US economy is in great shape, although its serious problem is the scale of the country's debt; the media assess that elements of Donald Trump and Kamala Harris's programmes could ruin this.

Time Magazine surveyed CEOs of the largest US companies; 81% believe the US economy is in surprisingly good condition. The Economist writes that the US GDP growth has exceeded analysts' expectations, and the economy is dynamic and innovative.

Consulting firm Deloitte forecasts that by the end of 2024 and into 2025, favourable phenomena such as high consumer spending and significant corporate investment will continue in the US, increasing by 4% next year. The economic outlook remains "optimistic," and investor confidence is high. However, in a "pessimistic scenario," the key negative factors are "potential geopolitical conflicts and trade policies, which could lead to persistent inflation."

The adoption of the Inflation Reduction Act in 2022, aimed at spurring strategic technology manufacturing in the US, such as the production of electric cars, batteries, and semiconductors, has accelerated factory construction, and investments in such infrastructure increased by 13% in 2023, which should maintain good economic conditions. However, Deloitte reported that escalating conflicts in Ukraine and the Middle East threaten to disrupt supply chains and trade exchange and increase oil prices.

Time Magazine, however, points out that Americans' assessments of the economic situation are more influenced by food prices; although the Fed has curbed inflation, these prices are not falling and have risen by 20% since the start of the pandemic.

Another concern for Americans is high home prices, which have increased by 20% on average over the past three years. The cost of mortgages has also risen because the Fed has kept interest rates high for a long time. The housing market – according to Bank of America – due to insufficient supply and high demand, which increased dramatically after the pandemic outbreak, could remain "in a bind" until 2026.

However, the most serious problem of the US economy is the scale of the country's debt, writes The Economist. This year, the US will spend more on servicing the debt than on defence. It is all the more worrying that both Trump and Harris exhibit "protectionist tendencies", which could worsen the situation.

"The truth is the economy is in pretty solid shape," CNN assesses in an extensive analysis. Even recent signals of rising unemployment are not alarming, as employment levels are higher than at the start of Joe Biden's presidency, and the unemployment rate – 4.3% – "historically low".

Additionally, the Fed's recent decision to cut interest rates by 0.5 percentage points should boost the labour market.

America's most serious problem is a "colossal deficit," and based on the declarations of Trump and Harris, it can already be said that they do not promise "fiscal prudence" – continues The Economist.

Both candidates' proposals for restoring state finances are fundamentally unserious. Trump has promised to use cryptocurrencies and increase oil drilling to pay off the debt, which "is complete nonsense," adds the British weekly. Harris promised to reduce the debt, but the assessment of her program is more difficult because it lacks specifics. According to the independent research group Penn Wharton Budget Model (PWBM), cited by The Economist, implementing Trump's program would increase the US deficit to about 8% of GDP (currently 6%), and implementing Harris's plans would raise it to 7%.

The economic assumptions of the Republican candidate – which the Financial Times calls "Trumponomics" – pose additional risks. He wants to fundamentally change the structure of budget revenues so that tariffs become more significant than taxes. The former president promised universal 10-per cent tariffs on all imports and 60% tariffs on goods from China, which could prompt America's trading partners to impose retaliatory tariffs, which would harm the US economy and consumer purchasing power.

The Financial Times forecasts that if the former president wins the election and implements "Trumponomics," it will fundamentally transform America's economy and its relations with the rest of the world. Meanwhile, CNN notes that even Arthur Laffer, an economist from Trump's entourage, admits that all these threats, sanctions, and tariffs are not the right way. It's a straightforward path to "World War III."